Surge in House Sales Indicates Improving Economy
HOUSES are selling again.
One good month - February - does not a rebound make in a market strewn with sputters and false starts.
But the 9.3 percent increase in the sale of existing houses from January to February was the largest monthly increase in nine years, according to new figures from the National Association of Realtors. Not since the pre-recession month of January 1989 have as many houses sold in a month.
If the market continues to spring back, the reverberations promise to stem the erosion in the net worth of home-owning families and the tax base that supports schools and local government.
For most homeowners, the rising and falling of the real estate market is only a paper fortune, since most houses are not on the market most years. But the impact on the sense of household well-being is powerful. The average American homeowner has more than $72,000 in equity in his house, according to the National Association of Home Builders. Economists have found close links between homeowner equity and how families spend and save their cash.
The real estate market recently, notes Stephen Fuller, a professor of urban planning at George Washington University, "clearly has depressed consumer confidence."
Rising sales are typically the major forerunner of rising prices. In fact, the median price of houses sold in February was $103,800, up about 2.4 percent from the month before.
No accurate national, or even regional, figures have yet emerged to capture the slide in home prices in many areas of the country in recent years.
THE median sales figures for the nation have been roughly flat since the late 1980s, after inflation is factored in. But those general figures are misleading.
Even in the Northeast and the West, where residents have seen clear erosion in house prices, the slide does not register strongly in median sales prices. After close study of the depressed Boston market, says Glen Crellin, vice president at the realtors association, he found that sales prices were holding up only because people were spending the same amount of money as before but buying bigger houses with it. So figures that tracked the value of a certain standard of house would have shown more slippage.
One place where that slippage has registered is in local tax coffers. Property taxes on single-family houses account for 53 percent of local government revenue, according to census statistics. Nearly half that money funds school districts.
As property assessments fall, tax revenues fall with them. In the affluent Washington suburb of Fairfax County, Va., for example, officials report residential property assessments dropped 4 percent last year. Since commercial property was devalued five times that much, the county lost 8 percent of its tax base in one year.
In recent months, housing prices have surpassed inflation, but real estate economists remain wary. Some of the sales are spurred by interest rates that are still low but rising. Buyers may be hurrying to capture them. Some buyers are finally taking the plunge after trying to wait out the recession. Neither type of buyer augurs a sustained sales pace.
Professor Fuller expects a fairly strong year in the housing market. The February sales figure, he says, "is clearly consistent with the beginning of a recovery."
But for homeowners waiting to recover the wealth they perceive losing in their houses, says Norman Glickman, director of housing research at Rutgers University, "it's going to be a long time before that happens." The housing market is still well saturated with houses, he says, and "the baby boomers are in their houses, basically."
"People who've bought their starter houses and want to move up can't sell their starter houses," he says.