Existing Home Sales in Decline – November 2013
Median prices continue to show strong year-over-year growth but in November existing-home sales took a tumble. A seasonally adjusted annual rate of 5.12 million for October fell to 4.90 million in November. This is the first time in 29 months that sales were below year-ago levels.
National Association of Realtors chief economist, Laurence Yun dissects the market:
Home sales are hurt by higher mortgage interest rates, constrained inventory and continuing tight credit. There is a pent-up demand for both rental and owner-occupied housing as household formation will inevitably burst out, but the bottleneck is in limited housing supply, due to the slow recovery in new home construction. As such, rents are rising at the fastest pace in five years, while annual home prices are rising at the highest rate in eight years.
According to the NAR:
The national median existing-home price for all housing types was $196,300 in November, up 9.4 percent from November 2012. Distressed homes – foreclosures and short sales – accounted for 14 percent of November sales, unchanged from October; they were 22 percent in November 2012. A smaller share of distressed sales is contributing to price growth.
Foreclosures sales made up 9% and sold for and average discount of 17 percent below market value. Five percent were short sales and discounted 13 percent. Housing inventory in November declined 0.9 percent to 2.09 million existing homes available for sale. Unsold inventory also exceeds last year’s percentage.
Time On the Market
Up from October’s 54 days median time on the market, November’s 56 days was well below the 70 days median time in November 2012. Next up, foreclosures typically sat for 59 days, while non-distressed homes took 55 days. Short sales hung on for a median of 120 days. Only 35 % of homes sold in November were on the market less than a month.
Qualified Mortgage – New Rules
Steve Brown, NAR President talks about how the new rules defining qualified mortgages that will be going in effect in the new year:
New underwriting rules to protect borrowers, effective in January, will prohibit many loan features, set tighter limits on the amount of debt a borrower can have and still get a mortgage, and require that lenders accurately measure a borrower’s ability to repay. This means that qualified borrowers are getting a loan that they are very likely to be able to repay, but some borrowers may wind up paying much more for their mortgage, or not get a loan at all due to the tougher standards. The new rules may tighten credit too much, but we’re hopeful regulators will make adjustments if this proves to be true.
Sales in the Northeast declined 3.0 percent to an annual rate of 650,000 in November, 6.6 percent above 2012. Up 5.7 percent from last year, median price for the Northeast was $242,900.
Unchanged from a year ago, existing-home sales in the Midwest were at 1.7 million, and the median price was $151,100 or 6.7 percent higher than November 2012.
1.07 million were sales in the West, 10.1 percent lower than last year and dropped 8.5 percent this month due, in part to constrained inventory. Median price in the West was $284,400.
In the South median price was $168,700, up 7.7 percent from last year. Existing-home sales took a 2.4 percent dive to 2.01 million.
Looking ahead, housing economists are predicting that housing prices will really rocket this year. The NAR forecasts a 5% rise in prices. Mortgages are also supposed to rise this year, which may cripple homebuyers’ abilities to afford new homes. Inventories were low at the beginning of 2013 but in the coming year they should stabilize and return to traditional seasonal levels. Foreclosure activity is expected to slow and inventory has dropped to multi-year lows, down nearly 33 percent since the end of 2012. The NAR’s Home Affordability Index, dropped to a five-year low this past year as price increases outpaced income growth. This Index will fall further from rising mortgage rates if the U.S. economy grows at a faster pace and incomes begin to rise.