The National Association of Realtors said Monday that sales of existing homes fell 6.1% to a seasonally adjusted annual rate of 4.93 million. That was down from a revised annual pace of 5.26 million in October. Sales dropped to their lowest annual pace since May (4.91 million) but are above year-over-year levels (up 2.1% from last November) for the second straight month.
The combination of higher home prices and relatively stagnant incomes has reduced affordability and restrained buying. A recent decline in mortgage rates has yet to lure more buyers into the market. At the same time, fewer distressed properties and bargains, which tend to attract investors, are coming onto the market.
Lawrence Yun, NAR chief economist, says sales activity was choppy throughout the country in November and housing inventory began its seasonal decline. “Fewer people bought homes last month despite interest rates being at their lowest levels of the year,” he said. “The stock market swings in October may have impacted some consumers’ psyches and therefore led to fewer November closings. Furthermore, rising home values are causing more investors to retreat from the market.”
The median existing-home price for all housing types in November was $205,300, which is 5.0% above November 2013. This marks the 33rd consecutive month of year-over-year price gains.
Total housing inventory at the end of November fell 6.7% to 2.09 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace – unchanged from last month. Despite the tightening in supply, unsold inventory remains 2.0% higher than a year ago, when there were 2.05 million existing homes available for sale.
“Lagging homebuilding activity continues to hamstring overall housing supply and is still too low in relation to this year’s promising job growth,” says Yun. “Much faster price and rent appreciation – easily exceeding wage growth – will occur next year unless new construction picks up measurably.”
All-cash sales were 25% of transactions in November, down from 27% in October and 32% in November of last year.
Individual investors, who account for many cash sales, purchased 15% of homes in November, unchanged from last month and below November 2013 (19%). Sixty-one percent of investors paid cash in November.
The percent share of first-time buyers in November climbed to 31%, up from October (29%) and is the highest share since October 2012 (also 31%). First-time buyers have represented an average of 29% of buyers through November of this year.
NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says Fannie Mae and Freddie Mac’s new low downpayment program should improve access to credit for responsible buyers. “NAR applauds Fannie and Freddie’s commitment to homeownership by serving creditworthy borrowers who lack the resources for substantial down payments plus closing costs with its new down payment program,” he said. “The new program mitigates risk with strong underwriting and ensures that responsible buyers have access to safe and affordable mortgage credit. Furthermore, NAR believes lenders must do their part to ensure loans are prudently underwritten and are made available to qualified borrowers.”
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage in November dropped to 4.0%, its lowest level since May 2013 (3.54%), and down from 4.04% in October.
Distressed sales – foreclosures and short sales – were unchanged in November from October (9%) and remained in the single digits for the fourth month this year; they were 14% a year ago. Six percent of November sales were foreclosures and 3% were short sales. Foreclosures sold for an average discount of 17% below market value in November (15% in October), while short sales were discounted 13% (10% in October).
Properties typically stayed on the market in November longer (65 days) than last month (63 days) and a year ago (56 days). Short sales were on the market the longest at a median of 116 days in November, while foreclosures sold in 65 days and non-distressed homes took 63 days. Thirty-two percent of homes sold in November were on the market for less than a month.
Single-family and Condo/Co-op Sales
Single-family home sales dropped 6.3% to a seasonally adjusted annual rate of 4.33 million in November from 4.62 million in October, but remain 2.4% above the 4.23 million pace a year ago. The median existing single-family home price was $206,200 in November, up 5.6% from November 2013.
Existing condominium and co-op sales declined 4.8% to a seasonally adjusted annual rate of 600,000 units in November from 630,000 in October, and are unchanged from a year ago. The median existing condo price was $199,000 in November, which is 1.2% higher than a year ago.