Existing Home Sales Ending Year on More Hopeful Note
Existing home sales rose for the third straight month in November, boosted by gains in the Northeast and South, the National Association of Realtors reported yesterday.
NAR said total existing home sales rose by 0.7 percent to a seasonally adjusted annual rate of 5.61 million in November from a downwardly revised 5.57 million in October. November’s sales pace was the highest since February 2007 (5.79 million) and is 15.4 percent higher than a year ago (4.86 million).
Single-family home sales declined by 0.4 percent to 4.95 million, seasonally adjusted, in November from 4.97 million in October, but remained 16.2 percent above the 4.26 million pace a year ago. The median existing single-family home price was $236,500 in November, up 6.8 percent from a year ago. Existing condominium and co-op sales jumped by 10.0 percent to 660,000 units in November, and are now 10.0 percent above a year ago. The median existing condo price was $222,600 in November, 5.8 percent above a year ago.
Regionally, gains in the Northeast and South offset declines in the West and Midwest. In the Northeast, sales jumped by 8 percent to 810,000, seasonally adjusted, and rose by 15.7 percent from a year ago. The median price in the Northeast rose to $263,000, which is 3.3 percent higher than a year ago. Sales in the South rose by 1.4 percent to an annual rate of 2.22 million and are now 11.6 percent higher than a year ago. The median price in the South rose to $206,900, up 9.2 percent from a year ago.
In the Midwest, sales decreased by 2.2 percent to 1.33 million, but improved by 18.8 percent from a year ago. The median price in the Midwest rose to $180,300, up 6.5 percent from a year ago. Sales in the West fell by 1.6 percent to 1.25 million in November, but improved by 19.0 percent from a year ago. The median price in the West rose to $345,400, up 8.5 percent from a year ago.
Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., noted November’s closings reflect contracts signed well before the post-election rise in mortgage rates, which may have pulled sales forward.
“Sales are up by a huge 15.4 percent year to year, but last year’s sales were held back by the introduction of new mortgage rules, which temporarily disrupted closings,” Vitner said. “Historically low inventories continue to make this an unusually good time to sell a home.”
Vitner said with fewer inventories, homes are selling very quickly. “The lack of existing home inventory reflects a number of structural shifts,” he said. “As the population has aged, fewer people are moving, which is lessening housing turnover. Many home buyers are also suffering from rate-lock, or some variation of it. Once they have refinanced their home at an ultra-low rate and are rapidly building equity, they are less willing to part with their current home, particularly with the paucity of homes available for sale. Lastly, the rise in investor-owned properties has made renting a more viable option for a larger proportion of the population. Moreover, the preponderance of rental homes has reduced the supply of fixer-upper homes that had provided a gateway for many first-time home buyers.”
NAR Chief Economist Lawrence Yun said the past three months have been “outstanding” for existing home sales. “The healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates accurately rose from their historically low level have combined to drive sales higher in recent months,” he said. “Furthermore, it’s no coincidence that home shoppers in the Northeast–where price growth has been tame all year–had the most success last month.”
NAR reported the median existing home price for all housing types in November rose to $234,900, up 6.8 percent from a year ago ($220,000). November’s price increase marks the 57th consecutive month of year-over-year gains. Total housing inventory at the end of November dropped 8.0 percent to 1.85 million existing homes available for sale, and is now 9.3 percent lower than a year ago (2.04 million), falling has fallen year-over-year for 18 straight months. Unsold inventory is at a 4.0-month supply at the current sales pace, which is down from 4.3 months in October.
“Existing housing supply at the beginning of the year was inadequate and is now even worse heading into 2017,” Yun said. “Rental units are also seeing this shortage. As a result, both home prices and rents continue to far outstrip incomes in much of the country.”
The report said first-time buyers represented 32 percent of sales in November, down from 33 percent in October but up from 30 percent a year ago. Properties typically stayed on the market for 43 days in November, up from 41 days in October but down considerably from a year ago (54 days). Short sales were on the market the longest at a median of 110 days in November, while foreclosures sold in 55 days and non-distressed homes took 41 days. Forty-two percent of homes sold in November were on the market for less than a month.
NAR said all-cash sales represented 21 percent of transactions in November, down from 22 percent in October and 27 percent a year ago. Individual investors purchased 12 percent of homes in November, down from 13 percent in October and 16 percent a year ago. Fifty-eight percent of investors paid in cash in November, matching the lowest share since August 2009.
Distressed sales rose to 6 percent in November, up from 5 percent in October but down from 9 percent a year ago. Four percent of November sales were foreclosures; 2 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in November (18 percent in October), while short sales were discounted 16 percent (unchanged from October).