Existing Home Sales Likely Improved in November 2010

The National Association of Realtors existing home sales headlines for November 2010 in part:

Existing-home sales got back on an upward path in November, resuming a growth trend since bottoming in July, according to the National Association of Realtors®.

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 5.6 percent to a seasonally adjusted annual rate of 4.68 million in November from 4.43 million in October, but are 27.9 percent below the cyclical peak of 6.49 million in November 2009, which was the initial deadline for the first-time buyer tax credit.

Lawrence Yun, NAR chief economist, is hopeful for 2011. “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,” he said.

Yun added that home buyers 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.”

The national median existing-home price2 for all housing types was $170,600 in November, up 0.4 percent from November 2009. Distressed homes3 have been a fairly stable market share, accounting for 33 percent of sales in November; they were 34 percent in October and 33 percent in November 2009.

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

Total housing inventory at the end of November fell 4.0 percent to 3.71 million existing homes available for sale, which represents a 9.5-month supply4 at the current sales pace, down from a 10.5-month supply in October.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said good buying opportunities will continue. “Traditionally there are far fewer buyers competing for properties at this time of the year, so serious buyers have a lot of opportunities during the winter months,” he said. “Buyers will enjoy favorable affordability conditions into the new year, although mortgage rates are expected to gradually rise as 2011 progresses.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.30 percent in November from a record low 4.23 percent in October; the rate was 4.88 percent in November 2009.

“In the short term, mortgage interest rates should hover just above recent record lows, while home prices have generally stabilized following declines from 2007 through 2009,” Yun said. “Although mortgage interest rates have ticked up in recent weeks, overall conditions remain extremely favorable for buyers who can obtain credit.”

A parallel NAR practitioner survey shows first-time buyers purchased 32 percent of homes in November, the same as in October, but are below a 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. “The elevated level of all-cash transactions continues to reflect tight credit market conditions,” Yun said.

Single-family home sales rose 6.7 percent to a seasonally adjusted annual rate of 4.15 million in November from 3.89 million in October, but are 27.3 percent below a surge to a 5.71 million cyclical peak in November 2009. The median existing single-family home price was $171,300 in November, which is 1.2 percent above a year ago.

Existing condominium and co-op sales declined 1.9 percent to a seasonally adjusted annual rate of 530,000 in November from 540,000 in October, and are 32.2 percent below the 782,000-unit tax credit rush one year ago. The median existing condo price5 was $165,300 in November, down 5.5 percent from November 2009. “At the current stage of the housing cycle, condos are offering better deals for bargain hunters,” Yun said.

Getting through the obvious fluff of biased presentation of data, Econintersect confirms using the unadjusted data – home sales likely increased in the 5% range MoM.  Historically, existing home sales fall in November – and in November 2010 they are almost equal to October 2010.

Still home sales are well below 2006 levels, but still above the terrible November 2008.  Unadjusted home prices were almost the same as last month, but when using a 3 month rolling average to be comparable with Case-Shiller data – the downward trend remained.

Case-Shiller only uses home sales in its analysis where previous home sales data is available.  The NAR uses all home sales in its analysis.  Econintersect believes both methodologies are acceptable.  It is necessary to recognize the noise factors in these numbers, however.  Case-Shiller is reported as a 3-month moving average and the NAR data is reported as single month data (the graph above converted the NAR data into a 3 month moving average for comparison purposes).

The amount of homes for sale declined (as is normal seasonally).  However, looking at YoY data – home inventories are higher then last year.  This has rising inventory level YoY has been persistent since the beginning of the 2Q2010.

Using the unadjusted data, there is 10.5 months home inventory at current sales rate.  Inventory supply has remained in this 10 months supply range since mid-year.

November 2010 existing home sales data does indeed look better then October but is overall “less good” than early 2010.  The YoY decline of 27.9% is weaker than GEI projected (down 25%) based on pending home sales data.

Related Articles

New Residential Construction is Almost Comatose in November  by Steven Hansen

Pending Home Sales Indicate 25% YoY Home Sales Decline for November  by Steven Hansen

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