Existing-Home Sales Surge 7.4% in November

The nearly year-long upward trend in U.S. home sales continued in November as existing home sales jumped a greater than expected 7.4% to a seasonally-adjusted annual rate of 6.54 million units, the National Association of Realtors announced Tuesday. At least part of that jump can be attributed to buyers rushing to close deals ahead of the original Nov. 30 deadline for claiming the federal government's new home-buyer tax credit. %%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%%The sales figures are a remarkable 44.1% higher than the 4.54 million unit pace of November 2008.Economists surveyed by Bloomberg News had predicted that November existing home sales would total a 6.25 million unit annualized rate. October's existing sales number was revised to a 6.09 million unit annual pace. The actual sales numbers were the strongest since housing sales peaked in February 2007 at a 6.55 million unit pace.

Inventories of existing homes fell 1.3% in November to a 6.5 month supply at the current sales pace, down from a 7.0 month supply in October, and an 8.0-month supply in September. Inventories have fallen about 15.5% in the past year. Economists say a healthy, normal market has a 3 month to 5 month supply of existing homes available for sale.

Prices, Interest Rates, Tax Credit Help Sales

Vicki Cox Golder, president of the National Association of Realtors, said attractive prices, and relatively low mortgage rates are key factors powering the existing home sales rise, but the federal government's home-buyer tax credits are also is providing a tailwind.

"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," Golder said, in a statement. "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."

Congress extended the $8,000 for tax credit for first-time home buyers and expanded the program to give a $6,500 credit to current home owners. Buyers now have until April 30, 2010, to sign a home purchase contract to take advantage of the incentive.

Meanwhile, the U.S. median home price for all types of housing fell at an annualized rate of 4.3% to $172,600 in November; however, that's still a lower year-over-year price decline than the 7.2% decline recorded in October. Year-over-year, the median sale price for a single-family home fell 4.4% to $171,900; condos declined 3.1% to $178,000.

Economists and market analysts follow the monthly existing home sales statistic closely because previously-owned homes account for the bulk of U.S. home sales. Moreover, these professionals follow U.S. housing activity because the sector doesn't operate in a vacuum. When homes are sold, consumers tend to buy durable goods and big ticket items for their new homes: furniture, appliances, landscaping equipment, home care supplies, etc. -- an uptrend in any of which is good news for the economy and bullish for U.S. stock markets.

Regional Numbers

In the Northeast, existing home sales increased from November 2008 by 6.6%, while the median price plummeted 13.1% to $223,400 compared to a year ago. Sales surged 8.4% in the Midwest, where the median price dipped 0.4% to $140,800. In the South, sales rose 4.8%, with the median price edging 1.4% lower to $151,400. In the West, sales surged 10.6%, with the median price falling 4.1% to $231,100.

Housing Analysis

November marked another good month for existing home sales, and the U.S. housing sector's recovery story remains in place. The three key take-aways from the November data are these: First, sales rose in three regions, and in the lone declining region, the Midwest, sales were essentially flat. Second, the rate of decline of the median price for all types of housing continues to slow -- an indication that the market is firming up -- as buyers enter the market. Third, and perhaps most significant, inventories continue to decline and are now at a 6.5-month supply at the current sales rate. That's still too high, but the steady reduction in inventories is a tell-tale sign of a housing sector that is continuing to heal. If sales maintain this pace, inventories could normalize by summer.
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