While the policymakers fretting over the collapse of the housing market, it may have already begun righting itself. Despite the collapse in prices, or perhaps because of it, sales in previously-owned houses rose 5.5% last month — the biggest gain in over 5 years:
Sales of previously owned U.S. homes rose 5.5 percent last month, the biggest gain since July 2003, and the inventory of unsold homes fell, a hopeful sign for a housing market mired in a long slump.
The National Association of Realtors said on Friday that sales of existing homes rose to a 5.18 million-unit annual rate from the 4.91 million unit pace set in August. Economists had expected sales to rise to only a 4.93 million unit rate.
It was the first time the sales pace had risen above its year ago level in nearly three years, a sign the market could be stabilizing.
The surprisingly large jump in sales pushed the inventory of unsold homes down by 1.6 percent to 4.27 million, or a 9.9 months’ supply at the current pace, the lowest since February.
The trends gives some credence to the analysis that we may have already hit bottom in the financial crisis. If pricing stabilizes, fewer homeowners will be at risk of foreclosure, which could also help build a floor for mortgage-backed securities. Once that happens, the real value of those MBSs can be known, and a better analysis of institutional stability can begin.
This also shows that allowing the market to work is the best policy. Once prices moved back to reality, people began buying homes again.
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