Previously Owned Home Sales in U.S. Drop for Third MonthLorraine Woellert
Previously owned U.S. home sales declined for the third consecutive month in November to the lowest level of the year as rising mortgage rates and a limited supply of properties discouraged buyers.
Purchases dropped 4.3 percent to a 4.9 million annual rate, the National Association of Realtors reported today in Washington. The median forecast of economists in a Bloomberg survey called for the pace to slow to 5.02 million. Still, the group projects 2013 will be the best year for the industry in seven years, with an estimated 5.1 million properties sold.
Rising prices and borrowing costs have put homes out of reach for many first-time buyers and a partial federal government shutdown in October may have delayed some purchase decisions. At the same time, builder confidence has picked up along with new construction, signaling gains in housing will be sustained.
“Part of the weakness was the government shutdown,” said Brian Jones, senior U.S. economist in New York at Societe Generale. “The vast majority of indicators we’ve gotten on housing are pretty solid.”
Estimates in the Bloomberg survey of 75 economists ranged from 4.9 million to 5.21 million.
Stocks held losses after the housing figures. The Standard & Poor’s 500 Index declined 0.4 percent to 1,803.29 at 10:24 a.m. in New York.
Another report today showed applications for unemployment benefits unexpectedly rose last week to an almost nine-month high, showing fluctuation in the filings that typically occurs around the year-end holidays.
Jobless claims climbed by 10,000 to 379,000 in the period ended Dec. 14, the most since the end of March, the Labor Department said.
The median price of an existing home rose 9.4 percent to $196,300 in November from $179,400 a year earlier, today’s report showed.
The number of existing properties for sale dropped 0.9 percent from October to a 2.09 million rate, the fewest since March. At the current pace, it would take 5.1 months to sell those houses, compared to 4.9 months in the previous three months. Inventory was up 5 percent from a year earlier.
Purchases of single-family homes decreased 3.8 percent to an annual rate of 4.32 million. The sales pace of multifamily properties including condominiums dropped 7.9 percent to 580,000.
Sales declined in all four regions, led by a slump in the West, where a lack of inventory restrained activity. Demand decreased 8.5 percent in the West, 4.1 percent in the Midwest, 3 percent in the Northeast and 2.4 percent in the South.
“It’s a clear loss of momentum,” NAR Chief Economist Lawrence Yun said at a news conference as the figures were released. “Even with the weakening, we expect home sales to be the best in seven years.”
Cash transactions accounted for about 32 percent of all purchases, compared with 30 percent a year earlier, the report showed.
Sales of distressed property, including foreclosures, accounted for 14 percent of the total last month, unchanged from October.
Existing-home sales, which are tabulated when a purchase contract closes, are recovering from a 13-year low of 4.11 million in 2008 after reaching a record 7.08 million in 2005.
The housing rebound this year has gained traction amid job gains and rising stock values. Residential construction starts soared in November to a five-year high, helping explain why builder optimism this month matched the highest level since 2005.
Sustained demand and a shortage of properties for sale have allowed builders including Toll Brothers Inc. and Lennar Corp. to raise prices. At Miami-based Lennar, the average price for a new house rose 18 percent to $307,000 in the three months ended Nov. 30. Orders climbed 13 percent to nearly 4,500 properties and the average sale price was up 18 percent to $307,000, the company reported this week.
At the same time, borrowers are incurring higher interest costs. The average 30-year, fixed-rate mortgage was 4.42 percent for the week ended Dec. 12, compared with 3.32 percent a year ago, according to Freddie Mac in McLean, Virginia.
Rates could rise further as the Federal Reserve prepares to pare its monthly bond purchases in January from $85 billion to $75 billion, the first steps toward unwinding an unprecedented stimulus begun during the recession that ended in June 2009.
“If incoming information broadly supports the committee’s expectation of ongoing improvement in labor-market conditions and inflation moving back toward its longer-run objective, the committee will likely reduce the pace of asset purchases in further measured steps,” the Federal Open Market Committee said yesterday after a two-day meeting.
Home-price appreciation and sales growth have taken a hit from rising rates and U.S. fiscal uncertainty, Lennar Chief Executive Officer Stuart Miller said. Those headwinds should dissipate as the recovery gains strength, he said.
“The short supply of available homes and pent-up demand, along with a generally improving economy, will continue to drive the housing recovery forward,” Miller said on a Dec. 18 earnings call. “We’re anticipating a robust spring selling season.”