U.S. Economy

U.S. Economy: Existing Home Sales Climb to Eight-Month High

The article is basically about how the sales of previously owned homes unexpectedly climbed in January to the highest level in eight months. Prices of the houses decreased, and investors saw the good opportunity by using all-cash transactions to snap up distressed properties.

National Association of Realtors showed that purchases increased 2.7% to 5.36 million annual rates. The share represented by foreclosures and short sales rose to a 12-month high, pushing the median price to the lowest level in almost 9 years.

Three of four regions showed increases last month, led by a 7.9% gain in the West. Purchases in the Northeast fell 4.6%. Sales climbed to about 50% of the total in cities like Las Vegas and Miami last month. The share of first-time buyers fell to 29% last month compared to an average 40%.

Ethan Harris, head of developed markets at Bank of America Merrill Lynch Global Research in New York explained market as a foreclosure-driven. He projected that sales would increase to 5.38 million rate, and he stated that this isn’t the sign of the market returning to health. Lawrence Yun, chief economist at the Realtors’ group, said distressed sales accounted for 37% of total sales last month, and all-cash transactions represented 32%, three times more than the average of about 10%. He also stated that investors are rushing in looking for “bargains”, and that market is driven by cleansing of distressed property that is coming on to the market.

The main reason why the sales went up is because the prices of homes went down. Index of home values in 20 cities fell 2.4% in December from a year earlier, and prices were down 31% from their peak in July 2006. The median price decreased 3.7% from January 2010 to $158,800, the lowest since April 2002.

As the prices of homes went down, investors that could afford to buy homes saw the good opportunity in investing in it. They know that at some point the prices...