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US existing home sales decline unexpectedly in November: NAR

H.S. Borji
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The sale of previously-owned US homes plunged in November, raising concern the nascent housing recovery was losing momentum as inventory levels began to tighten.

Existing home sales declined 6.1 percent to a seasonally adjusted annual rate of 4.93 million, the National Association of Realtors reported today. The sales pace was down sharply from October’s 2014 highs of 5.25 million. A median estimate of economists called for a slight gain of 0.8 percent in November.

Sales fell in all four major regions. Sales dropped 4.2 percent in the Northeast, 8.9 percent in the Midwest, 3.2 percent in the South and 9.6 percent in the West, NAR data showed.

Total inventory at the end of November declined 6.7 percent to 2.09 million. At the current sales pace, it would take 5.1 months to clear existing inventories, unchanged from October. Inventory levels were still 2 percent higher than year-ago levels when there were 2.05 million previously-owned homes for sale.

The median sale price of previously-owned homes increased for the thirty-third consecutive month in annualized terms. The average sales price in October was $205,300, which is 5 percent higher than year-ago levels.

“Fewer people bought homes last month despite interest rates being at their lowest levels of the year,” said NAR chief economist Lawrence Yun in a statement. “The stock market swings in October may have impacted some consumers’ psyche and therefore led to fewer November closings. Furthermore, rising home values are causing more investors to retreat from the market.”

The US job market has propelled the housing market in recent months, as more plentiful jobs and bigger wage gains have rejuvenated buyer interest. US employers added 321,000 nonfarm payrolls in November, the biggest monthly gain since January 2012. Employers have added an average of 224,000 jobs each month in the last 12 months.

Combined with an improving labour market, declining mortgage rates and steady price gains have driven the housing recovery in the second-half of the year. Mortgage rates last week declined to their lowest levels this year, according to Freddie Mac’s latest survey. The average commitment rate on a 30-year fixed-rate mortgage was 3.8 percent in the week of December 18, down from 3.93 percent the prior week.

However, “Lagging homebuilding activity continues to hamstring overall housing supply and is still too low in relation to this year’s promising job growth,” Yun added.

The Commerce Department reported last week that housing starts and building permits declined in November, although the general trend continued to show underlying strength in builder activity. Housing starts declined 1.6 percent to a seasonally adjusted annual rate of 1.028 million, following an upwardly revised print of 1.045 million in October.

Building permits – a gauge of residential building intentions – declined 5.2 percent to a seasonally adjusted annual rate of 1.035 million in November following two consecutive monthly gains.

A separate gauge released last week showed homebuilder confidence remained steady in December, hovering near nine-year highs. The National Association of Home Builders’ housing market index came in at 57 in November, down slightly from 58. The monthly indicator factors current sales, future sales expectations and buyer traffic.

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