Foreclosure Home Sales Skew Housing Recovery Reports

You may have heard that the housing was getting better. News reports are saying existing home sales came in "above expectations."

Those news reports are talking about resale homes, because new home sales dropped 11 percent to an annual pace of 355,000, lower than estimates from economists.

Why the disparity?

The increase in existing home sales is due in part to distressed home sales, meaning foreclosures, and short sales. NAR acknowledges that 33% of existing home sales were foreclosures, not basic real estate transactions that drive the housing market. If you were to exclude the distressed sales portion of the market, normal existing home sales did not rise 7.4%, as reported, but instead remained down similar to new home sales.

Many experts believe that foreclosure inventory is being held back from the real estate market because of government attempts to keep people in their homes who may not be able to afford them, which delays the inevitable. Foreclosure home sales may continue to influence the real status of the housing recovery and raises a question about home price stability.

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