Existing-Home Sales Fail to Keep the Rubber Side Down in November
NAR blames “Know Before You Owe,” not diminished demand
Existing-home sales dropped off considerably in November to the slowest pace in 19 months, but some of the decrease was likely because of an apparent rise in closing time-frames that may have pushed some transactions into December, according to the National Association of Realtors®. All four major regions saw sales declines in November.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 10.5 percent to a seasonally adjusted annual rate of 4.76 million in November (lowest since April 2014 at 4.75 million) from a downwardly revised 5.32 million in October. After last month’s decline (largest since July 2010 at 22.5 percent), sales are now 3.8 percent below a year ago — the first year-over-year decrease since September 2014.
Lawrence Yun, NAR chief economist, laid the blame squarely on the new “Know Before You Owe” initiative:
“Sparse inventory and affordability issues continue to impede a large pool of buyers’ ability to buy, which is holding back sales,” he said. “However, signed contracts have remained mostly steady in recent months, and properties sold faster in November. Therefore it’s highly possible the stark sales decline wasn’t because of sudden, withering demand.”
“It’s possible the longer time-frames pushed a latter portion of would-be November transactions into December,” says Yun. “As long as closing time-frames don’t rise even further, it’s likely more sales will register to this month’s total, and November’s large dip will be more of an outlier.”
The median existing-home price for all housing types in November was $220,300, which is 6.3 percent above November 2014 ($207,200). November’s price increase marks the 45th consecutive month of year-over-year gains.
Total housing inventory at the end of November decreased 3.3 percent to 2.04 million existing homes available for sale, and is now 1.9 percent lower than a year ago (2.08 million). Unsold inventory is at a 5.1-month supply at the current sales pace, up from 4.8 months in October.
“Realtors® worked hard to prepare for Know Before You Owe, and we knew there would be some near-term challenges as the industry continues to adapt,” says NAR President Tom Salomone. “Nonetheless, an early trend of longer lead times to closings is cause for concern. As Realtors® report issues with their transactions, we will continue to work with the Consumer Financial Protection Bureau to ensure as little disruption as possible to the business of real estate.”
Properties typically stayed on the market for 54 days in November, a decrease from 57 days in October and below the 65 days in November 2014.
The percent share of first-time buyers was at 30 percent in November, down from 31 percent both in October and a year ago.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage hovered below 4 percent for the fourth consecutive month but increased in November to 3.94 from 3.80 percent in October. A year ago, the average commitment rate was 4.00 percent.
“The Federal Reserve’s decision this month to raise short-term rates is the first of many increases over the next couple of years,” says Yun. “Although this first move will likely have minimal impact on mortgage rates, additional hikes will push borrowing costs to around 4.50 percent by the end of next year. With home prices expected to continue rising, wages and new home construction need to start increasing substantially to preserve affordability.”
The Midwest led all four major regions descending 15.4 percent to an annual rate of 1.10 million in November, and are now 2.7 percent below November 2014. The median price in the Midwest was $169,300, up 5.3 percent from a year ago.