Why new home sales rally while existing home sales lag behind
Laura Seitz, Deseret News
Sales are picking up for both new and existing homes, but there is an anomaly: New homes, which are more expensive, are moving faster than less-expensive existing homes.
Two selling situations in Utah illustrate what is happening across the nation.
Real estate expert and agent Gaynell Instefjord has had a few buyers lined up to purchase an existing home as a short sale in West Jordan, Utah — but the process for buyers is difficult and takes months.
Meanwhile, Philip Mosher, director of sales and marketing at Hamlet Homes, is happy to talk about how the developer at the new Kenmure Place homes in Millcreek has sold six homes out of the 20 available. "That's a home a week," he says. "We are happy about it."
Recent national statistics show the trend.
First, new home sales: The U.S. Census Bureau and the U.S. Department of Housing and Urban Development report that the sales of new single-family houses in January were 28.9 percent higher than they were a year ago.
Existing home sales are also up: The National Association of Realtors reported that existing home sales in January (including single-family homes, townhomes, condominiums and co-ops) were 9.1 percent higher than a year ago and 10.2 percent higher in February compared to last year.
Part of the reason existing home sales are trailing new home sales is inventory — the amount of homes for sale. The number of homes available affects prices. And as Instefjord illustrates, prices and inventory are intertwined with the results of the housing downturn a few years ago.
In January, the supply of existing homes on the market hit a seven-year low, according to the National Association of Realtors. In February, the number of homes on the market went up a little, but it was still down 19.2 percent compared to the same time last year, Haver Analytics says.
The Re/Max National Housing Report had slightly more negative news. It averaged data from 52 different metro areas to show that in those areas, February saw a 2.7 percent reduction in the number of homes listed for sale. "A month-to-month loss of inventory has now occurred for 14 straight months," the report says. The number of homes was 29.1 percent lower than the same time last year, according to Re/Max's report.
"The preowned prices are not going up at the rate you would expect them to go up with the narrow amount of inventory that we have," says Instefjord, an associate broker at Coldwell Banker Residential Brokerage in Sandy.
Usually scarcity meets a demand that drives prices up. But there are strange things going on in the existing home world. Instefjord puts much of the blame on short sales.
Short sales are where a home owner owes more on a home than the home is worth. They can sell the house, but won't make enough to pay off the bank loan. They are short the difference.
If a bank wants to, they can agree to accept whatever the owner can get for a home. But banks are naturally reluctant to take the loss and are slow to make up their minds about approving short sales.
Instefjord has a client who wants to sell a home as a short sale. The bank approved the sale in December, but unfortunately the buyer failed. Another buyer made an identical offer in January and near the end of March the bank has still not approved the sale.
"The ability to move short sales through the system — to get them to 'sold' is very difficult," she says.