Eye On Housing
Existing home sales, as reported by the National Association of Realtors (NAR), decreased 10.5% in November to the lowest level since April 2014, a decline NAR attributed to the implementation of The Know Before You Owe mortgage disclosure rule by the Consumer Financial Protection Bureau (CFPB). The new rule was designed to help consumers understand their loan options and avoid closing cost surprises. Total existing home sales in November decreased to a seasonally adjusted rate of 4.76 million units combined for single-family homes, townhomes, condominiums and co-ops, down from a downwardly adjusted 5.32 million units in October. November existing sales were down 3.8% from the same period a year ago, and represent the first year-over-year decrease since September 2014.
Existing sales declined in all regions, ranging from 6.2% in the South to 15.4% in the Midwest. Year-over-year, only the Northeast increased, a slight 1.5%. The remaining regions decreased, ranging from 2.7% in the Midwest to 5.7% in the South.
Total housing inventory decreased by 3.3% in November, and is 1.9% below its level a year ago. At the current sales rate, the November unsold inventory represents a 5.1-month supply, up from a 4.8-month supply in October. Some 37% of homes sold in November were on the market for less than a month.
The distressed sales share increased to 9% in November from the 6% low in October. Distressed sales are defined as foreclosures and short sales sold at deep discounts. The November all-cash sales share increased to 27% in November from 24% in October and 25% in November 2014. Individual investors purchased a 16% share in November, compared to 13% in October and 15% during the same month a year ago.
The October median sales price of $220,300 was 6.3% above last November and represents the 45th consecutive month of year-over-year increases. The median condominium/co-op price of $211,400 in November was up 4.7% from last November.
The Pending Home Sales Index fell in both September and October, so as in October, a deceleration in existing sales was not unexpected. The share of first-time buyers decreased to 30% in November from 31% in October, and the long-term weakness in that market continues to create headwinds for prospective trade up buyers and retirees who need to sell their existing homes. However, NAR cites its own research that 94% of current renters who are 34 years of age or younger want to own a home. Prospective home sellers might interpret the recent decision by Federal Open Market Committee to raise the benchmark short-term interest federal funds rate as a reason to come to market ahead of modestly higher mortgage rates. The industry will also adjust to the new mortgage disclosure rule and shrink closing times. Builder sentiment remains strong and single-family starts remain strong as well. NAR suggests the steep decline in sales is not because of collapsing demand.
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