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Sales of Existing Homes Gain Ground in November

Existing-home sales got back on an upward path in November, resuming a growth trend since bottoming in July, the ""National Association of Realtors"":http://www.realtor.org (NAR) reported Wednesday.
[IMAGE] Sales of previously owned homes rose 5.6 percent last month to a seasonally adjusted annual rate of 4.68 million, according to the trade group’s market study. That follows a 2.2 percent drop during the month of October when the annual sales rate was at 4.43 million units.

Distressed homes accounted for 33 percent of the month’s total sales volume. Housing inventory at the end of November fell 4 percent to 3.71 million existing homes available for sale, which represents a 9.5-month supply at the current sales pace. That's down from a 10.5-month supply in October.

Paul Ashworth, chief U.S. economist for the research firm ""Capital Economics"":http://www.capitaleconomics.com, says despite the November gains, sales are running at about the same pace we saw during the worst of the financial crisis in the first quarter of 2009.

According to Ashworth, home sales are still down by more than a third from the homebuyer tax credit induced rebound earlier this year and down by 40 percent since the peak in 2005.

“Put in that context, it would be more than a stretch to characterize this latest uptick as a meaningful recovery,”


he said. “The more appropriate description is that housing is still bouncing along the bottom.”

Still, Lawrence Yun, NAR’s chief economist, says the numbers bode well heading into the new year. “Continuing gains in home sales are encouraging, and the positive impact of steady job creation will more than trump some negative impact from a modest rise in mortgage interest rates, which remain historically favorable,” Yun said.

Yun added that homebuyers are responding to improved affordability conditions. “The relationship recently between mortgage interest rates, home prices, and family income has been the most favorable on record for buying a home since we started measuring in 1970,” he said. “Therefore, the market is recovering and we should trend up to a healthy, sustainable level in 2011.”

NAR’s study shows that the median price for existing-homes sold nationwide in November was $170,600, up 0.4 percent from November 2009.

Foreclosures, which accounted for two-thirds of the distressed sales share last month, sold at a median discount of 15 percent, while short sales were discounted 10 percent in comparison with traditional home sales, according to NAR.

A parallel NAR practitioner survey shows first-time buyers purchased 32 percent of homes in November, the same as in October, but well below their 51 percent share in November 2009 from the surge to beat the initial deadline for the first-time buyer tax credit.

Investors accounted for 19 percent of transactions in November, also unchanged from October, but are up from 12 percent in November 2009. The balance of sales were to repeat buyers.

All-cash sales were at 31 percent in November, up from 29 percent in October and 19 percent a year ago. Yun says the elevated level of all-cash transactions continues to reflect tight credit market conditions.