Report: November’s Existing-Home Sales Decline in Economic Uncertainty

Sales of existing-homes in November weakened against a backdrop of an eroding economy, according to a ""report"":http://www.realtor.org/research/research/ehsdata released last week by the ""National Association of Realtors"":http://www.realtor.org (NAR).
Existing-home sales - including single-family, townhomes, condominiums, and co-ops - fell 8.6 percent to a seasonally adjusted annual rate of 4.49 million units in November. That figure is down from a revised level of 4.91 million in October, and is 10.6 percent below the 5.02 million-unit pace seen in November 2007.
Lawrence Yun, NAR chief economist, said he expected to see a decline last month. ""The quickly deteriorating conditions in the job market, stock market, and consumer confidence in October and November have knocked down home sales to another level. We hope the home sales impact from the stock market crash turns out to be short-lived, as was the case in 1987 and 2001,"" he said.
Yun said, it is ""imperative to provide incentives for home buyers to get back into the market. It also depends on how effectively Congress and the new administration can help facilitate the short sales process and unclog the mortgage pipeline - impediments remain for some buyers with good credit.""
According to ""Freddie Mac"":http://www.freddiemac.com, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 6.09 percent in November from 6.20 percent in October; the rate was 6.21 percent in November 2007. Last week, following moves by the Federal Reserve and the Treasury Department to bring down mortgage interest rates, Freddie Mac ""reported"":http://www.freddiemac.com/dlink/html/PMMS/display/PMMSOutputWk.jspxweek=52&ending=20081224 the 30-year rate fell to 5.14 percent - the lowest on record since Freddie Mac began the study in 1971.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said it's crucial to enact sufficient housing stimulus to spark an economic recovery. ""We need more than low interest rates to encourage enough buyers to enter the market and meaningfully draw down inventory, which would stabilize home prices - that, in turn, would help the economy to recover,"" he said.
""We should extend the first-time buyer tax credit to all home buyers and eliminate the repayment feature, and make permanent the higher loan limits that are vital in high-cost markets - the faster we do this, the faster housing and the economy can recover,"" McMillan said.
According to NAR, total housing inventory at the end of November rose 0.1 percent to 4.20 million existing homes available for sale. That number represents an 11.2-month backlog at the current sales pace, up from a 10.3-month supply in October.
Despite an overall softening in sales, NAR reports a solid trend of rising activity in some of the areas hardest hit by the mortgage downturn, including the California, Nevada, Arizona, and Florida markets. ""Sales are rising only in areas with large numbers of distressed properties as bargain hunters take advantage of discounted home prices,"" Yun explained.
The national median existing-home price for all housing types was $181,300 in November, down 13.2 percent from November 2007 when the median was $208,800. NAR explained that there remains a significant downward distortion in the current median price due to a large number of distress sales at discounted prices (the median is the amount at which half of the homes sold for more and half sold for less).
Yun cautioned that there will be negative consequences if housing stimulus is delayed. ""Falling home prices would lead to faster contraction in consumer spending and further deterioration in bank balance sheets. More importantly, falling home values would lead to higher loan defaults, including those recently modified distressed mortgages,"" Yun said.
Based on NAR's data, regionally, existing-home sales in the Northeast dropped 12 percent to an annual pace of 730,000 in November, and are 18 percent lower than a year ago. The median price in the Northeast was $257,700, down 0.1 percent from November 2007.
Existing-home sales in the Midwest fell 7.4 percent in November to a pace of 1 million and are 16 percent below November 2007. The median price in the Midwest was $142,400, down 11.2 percent from a year ago.
In the South, existing-home sales dropped 10.9 percent to an annual pace of 1.64 million in November, and are 17.6 percent below a year ago. The median price in the South was $154,500, which is 10.6 percent lower than November 2007.
Existing-home sales in the West declined 4.3 percent to an annual rate of 1.12 million in November but are 17.9 percent higher than November 2007. The median price in the West was $242,500, down 25.5 percent from a year ago.