Westminster

Earlier this week, the National Association of Realtors reported that in December, existing home sales rose unexpectedly while inventory declined.

The national real estate organization reported, “Existing home sales – including single-family, town homes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November, but are 3.5 percent below the 4.91 million unit pace in December 2007.”

Total home sales at the end of December fell 11.7 percent to 3.68 million existing homes available for sale, which represents a 9.3-month supply at the current home sales pace, down from a 11.2-month supply in November.

A total of 48 homes sold for more than $1 million last month, up from 35 in November.  At the same time, the median price of million-dollar property sales fell to $1.23 million, down more than 17 percent from November and more than 8 percent from the previous year.

As the report notes, over the past few months we have started to see a gradual turnaround in home sales, and that’s encouraging for an ultimate rebound in home sales. Much of the home sales increase has been focused on the lower end of the market rather than the move-up and luxury home sales. We have to work through this process and it’s going to take time, but ultimately I think you’ll see every segment of the market benefiting.

So why the sudden, so drastic surge in home sales? There are a few reasons:

A lot of people who were previously priced out of home sales can finally buy.

With interest rates under 5%, a buyer purchasing power is at its best in more than three decades.

After months of increasing or stable inventory, we are finally starting to see the numbers fall.

Increased consumer confidence (of late) based on the new administration.

We’re seeing a lot more investors coming into the market in addition to first time buyers.

So is it too early to call it a trend for home sales? Probably. In all honestly, we still have a lot of distressed properties to move through before we can begin to see prices stabilize. At least for the foreseeable future, buyers will probably have the edge but with an 84.9 percent increase in home sales year over year and inventories on the decline, we’re finally moving in the right direction. The key to all of this: buyers are ready to buy when they perceive a good value. Until then, they wait.

The bottom line is that while home sales are on the rise, we still have many distressed sales that must work their way through the system. With Wednesday’s controversial passing of the stimulus package (with a near party-line vote), we can only hope that the administration’s plan-in what we know is uncharted territory for our country-is successful.

The administration needs to move fast to stimulate a spring home sales upturn and set the foundation for an economic recovery.