Distressed properties continue to flood the market and depress housing prices. This, along with a rush to take advantage of an $8,000 federal tax credit that was originally set to expire on November 30, caused home sales to spike in November. Sales were 7.4% higher than in October and were a whopping 44.1% higher than in November 2008.
The median sales price for existing homes dropped by 4.3% from a year ago, to $172,600. In the Western United States, the drop was 4.1% to $231,000. The price drop indicates that greater supply had more to do with the higher sales than did increased demand. In fact, 33 percent of November sales were distressed properties.
Sacramento was one of three areas, along with San Diego and Riverside, that had lower sales, likely because there were inventory shortages for lower-priced homes.
Unless lenders more aggressively seek loan modifications and other arrangements with homeowners, the supply of distressed homes will not taper off anytime soon. Economists foresee 1.7 million homes heading for sale due to foreclosure or delinquency. Because Congress ended up extending the tax credit through April 2010, there will likely be another surge in buying then.
Lenders and the federal government will greatly influence the direction of the housing market. If lenders flood the market with foreclosed properties and short sales, then prices will drop further. But, if the Obama administration's program to assist homeowners with working out loan modifications rebounds from its initially sluggish start, then the housing market may have a steadier recovery. Banks too should see it as in their best interests to more steadily introduce homes onto the market and maintain the value of their housing stock.
