The western United States is leading the way in convincing wary Americans to buy a home.
The rebound isn't here yet, even in the West. Prices of existing homes in the region fell 31.5 percent in December compared with a year ago – double the 15.3 percent decline nationally, according to new numbers from the National Association of Realtors (NAR).
But those reductions – along with very low mortgage rates – have created a powerful incentive for would-be homeowners to step up to the plate.
West's sales up 11.5 percent
That's why home sales last month jumped 6.5 percent nationally and 11.5 percent for the West compared with the previous month on a seasonally adjusted basis. The West's sales are now up 31.6 percent compared with a year ago – the only region of the US to post an increase for the year.
At an annual rate of 1.25 million, the West's sales of existing homes now appears to have reached the levels of late 2006 or early 2007.
When will prices stop falling?
It's no surprise that housing demand goes up when prices fall. The next hurdle is for demand to rise so much that housing prices stabilize. That may take some time, depending on what's driving prices.
To the extent that forced sales are forcing prices down, the market will continue to fall for some time. To the extent that investors are rushing in, the market is finding a bottom.
"It is hard to say – both may be going on," Dr. Wachter writes.
Distress sales – owners forced to sell at discounted prices – accounted for 45 percent of all the transactions in December, the NAR reported. Nevertheless, inventories of existing homes fell to 9.3 months, a level not seen since 2007.
“The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions," warned Lawrence Yun, NAR chief economist, in a statement Monday.