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Michael Shenk |

Research Assistant

Michael Shenk

Michael Shenk was formerly a research assistant in the Research Department of the Federal Reserve Bank of Cleveland. His work focused on international topics and housing-market indicators.

01.18.08

Economic Trends

Housing Markets

by Michael Shenk

Existing single-family home sales were largely unchanged for the second consecutive month, as they increased a mere 0.7 percent in November.  For the past three months, existing single-family home sales have hovered around the 4.4 million mark, perhaps providing some evidence of stabilization in the housing market.  Sales of existing single-family homes have basically been free-falling for 26 months since peaking in September 2005 at 6.3 million units. 

If the market is going to stabilize, the inventory of existing single-family homes for sale will play a critical role.  Currently, the inventory level in terms of actual homes on the market, while below its peak, has not yet shown any definitive signs of turning a corner and beginning to descend.  Relative to the current sales pace, the supply of homes remains very much elevated at just under 10 months.

The market for new single-family homes, though smaller than the market for existing homes, is considered by some to be more of a leading indicator of housing activity because of when sales are recorded. Existing home sales are recorded at the time of closing, but new home sales are recorded when contracts are signed, a step much earlier in the home-buying process. Thus the fact that new single-family home sales fell 9.0 percent in November after three months of relative stability may give some optimists cause for concern. 

Inventories of new homes for sale remained elevated in November.  The actual number of homes on the market declined over the month, as it has done fairly regularly since peaking in July 2006.  However, the level of inventory measured relative to the current sales pace has continued to increase during this period, as sales continued their rapid decline.