- Mike Ochs
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November Existing House Sales Numbers Disappoint
Existing home sales in November rose at a slower pace than anticipated, spurred in part because of the end of a government tax credit aimed at encouraging first-time homeowners to buy. According to the National Association of Realtors (NAR), sales rose 5.6 percent over October to an annual rate of 4.68 million. Economists had predicted that sales would climb to 4.75 million for the year, according to Bloomberg News. When compared with November of 2009 – when the tax credit was still available – home sales had fallen by 25 percent. The tax credit, which was worth as much as $8,000, lifted existing home sales to a two-year high of 6.49 million one year ago.
Reduced prices and lower mortgage rates have made houses and condominiums more affordable, and these factors are likely to have propped up sales to some extent after the government tax credit expired. The unemployment rate – which is still in the 10 percent range nationally – is also depressing existing house sales. “Housing is going to remain dead in the water through the middle of 2011,” said Mark Vitner, senior economist at Wells Fargo Securities LLC. “Foreclosures coming back on the market will put downward pressure on prices.”
November existing home sales rose in the Northeast, the South and the Midwest; the West had the best showing, reporting a 12 percent increase. The median price rose slightly to $170,600 from $170,000 compared with November of 2009. Distressed sales, including foreclosures and short sales, totaled one-third of all sales. NAR officials predict that total existing sales for the year will be in the 4.8 million range, the lowest level recorded since 1997. Lawrence Yun, the NAR’s chief economist, expects sales to rise to 5.2 million in 2011, which he describes as a “sustainable” rate.
The bottom line is that the existing home market still favors buyers and is likely to remain that way for some time. Douglas Yearley, CEO of Toll Brothers, Inc., a large luxury homebuilder, said “As the economy improves, we believe our buyers are going to come right back out. It’s still a buyers’ market and you still need some incentives.”