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Another Big Gain in Existing-Home Sales as Buyers Respond to Tax Credit
Existing-home sales rose again in November as first-time buyers rushed to close sales before the original November 30 deadline for the recently extended and expanded tax credit, according to the National Association of Realtors.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.4% to a seasonally adjusted annual rate1 of 6.54 million units in November from 6.09 million in October, and are 44.1% higher than the 4.54 million-unit pace in November 2008. Current sales remain at the highest level since February 2007 when they hit 6.55 million.
Lawrence Yun, NAR chief economist, said the rise was expected. “This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead,” he said. “We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit, which hopefully will take us into a self-sustaining market in the second half of 2010. In all, 4.4 million households are expected to claim the tax credit before it expires and balance should be restored to the housing sector with inventories continuing to decline.”
An NAR practitioner survey2 shows first-time buyers purchased 51% of homes in November, compared with an upwardly revised 50% of transactions in October.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.88% in November from 4.95% in October; the rate was 6.09% in November 2008. Last month’s mortgage interest rate was the second lowest on record after bottoming at 4.81% in April 2009.
NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said conditions are optimal for buyers in the current market. “Inventories have steadily declined and are closer to balanced levels, which indicate home prices in many areas are either stabilizing or could soon stabilize and return to normal appreciation patterns,” she said. “This means buyers still have good choices but are purchasing near the bottom of the price cycle with historically low mortgage interest rates. Throw a tax credit on top and it really doesn’t get any better for buyers with secure jobs and long-term ownership plans.”
Total housing inventory at the end of November declined 1.3% to 3.52 million existing homes available for sale, which represents a 6.5-month supply3 at the current sales pace, down from an 7.0-month supply in October.
Raw unsold inventory figures are 15.5% below a year ago. The last time there was a lower supply of homes on the market was April 2006 when it was at a 6.1-month supply.
“Nearly all markets experienced a solid sales gain from one year ago,” Yun said. “The only markets with measurably lower sales were in San Diego, Riverside, and Sacramento, where inventory shortages for lower priced homes are limiting sales.”
For the second month in a row, sales have risen in all price classes from a year earlier. Prior to October, the only consistent gains were in the lower price ranges.
The national median existing-home price4 for all housing types was $172,600 in November, which is 4.3% below November 2008. Distressed properties, which accounted for 33% of sales in November, continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.
Single-family home sales jumped 8.5% to a seasonally adjusted annual rate of 5.77 million in November from a level of 5.32 million in October, and are 42.1 % above the pace of 4.06 million in November 2008. The median existing single-family home price was $171,900 in November, down 4.4% from a year ago.
Existing condominium and co-op sales in November were unchanged from a seasonally adjusted annual rate of 770,000 in October, but are 60.1% above the 481,000-unit pace a year ago. The median existing condo price was $178,000 in November, which is 3.1% below November 2008.
Regionally, existing-home sales in the Northeast rose 6.6% to an annual level of 1.13 million in November, and are 52.7% higher than November 2008. The median price in the Northeast was $223,400, down 13.1% from a year ago.
Existing-home sales in the Midwest increased 8.4% in November to a pace of 1.55 million and are 53.5% above a year ago. The median price in the Midwest was $140,800, a decline of 0.4% from November 2008.
In the South, existing-home sales rose 4.8% to an annual level of 2.39 million in November and are 44.8% higher than a year ago. The median price in the South was $151,400, down 1.4% from November 2008.
Existing-home sales in the West increased 10.6% to an annual rate of 1.46 million in November and are 28.1% above November 2008. The median price in the West was $231,100, which is 4.1% below a year ago.