Existing-Home Sales Continue to Climb in November
WASHINGTON (December 21, 2011) - Existing-home sales rose again in November and remain above a year ago, according to the National Association of Realtors®. Also released today were periodic benchmark revisions with downward adjustments to sales and inventory data since 2007, led by a decline in for-sale-by-owners.
Although rebenchmarking resulted in lower adjustments to several years of home sales data, the month-to-month characterization of market conditions did not change. There are no changes to home prices or month’s supply.
The latest monthly data shows total existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 4.0 percent to a seasonally adjusted annual rate of 4.42 million in November from 4.25 million in October, and are 12.2 percent above the 3.94 million-unit pace in November 2010.
Lawrence Yun, NAR chief economist, said more people are taking advantage of the buyer’s market. “Sales reached the highest mark in 10 months and are 34 percent above the cyclical low point in mid-2010 – a genuine sustained sales recovery appears to be developing,” he said. “We’ve seen healthy gains in contract activity, so it looks like more people are realizing the great opportunity that exists in today’s market for buyers with long-term plans.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.99 percent in November from 4.07 percent in October; the rate was 4.30 percent in November 2010; records date back to 1971.
NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said housing affordability conditions have set a new record high. “With record low mortgage interest rates and bargain home prices, NAR’s housing affordability index shows that a median-income family can easily afford a median-priced home,” he said.
“With consumer price inflation rising by more than 3 percent this year, consumers are looking to lock-in steady payments by taking out long-term fixed-rate mortgages. However, the problem remains that some financially qualified families who are willing to stay well within their means are being denied the opportunity to buy in today’s market by the overly restrictive mortgage underwriting situation,” Veissi said.
An elevated level of contract failures continues to hold back a broader sales recovery. Contract failures2 were reported by 33 percent of NAR members in November, unchanged from October but notably above a year ago when it was 9 percent.
Contract failures are cancellations caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including lower conforming mortgage loan limits, home inspections and employment losses.
Also released today are benchmark revisions3 to historic existing-home sales. The 2010 benchmark shows there were 4,190,000 existing-home sales last year, a 14.6 percent revision from the previously projected 4,908,000 sales. For the total period of 2007 through 2010, sales and inventory were downwardly revised by 14.3 percent. The revisions are expected to have a minor impact on future revisions to Gross Domestic Product.
“From a consumer’s perspective, only the local market information matters and there are no changes to local multiple listing service (MLS) data or local supply-and-demand balance, or to local home prices,” Yun explained.
A divergence developed over time between sales reported by MLSs and sales determined by a U.S. Census benchmark; the variance began in 2007. Reasons include growth in MLS coverage areas from which sales data is collected, and geographic population shifts. “It appears that about half of the revisions result solely from a decline in for-sale-by-owners (FSBOs), with more sellers turning to Realtors® to market their homes when the market softened. The FSBO market was overwhelmed during the housing downturn, and since most FSBOs are not reported in MLSs, national estimates of existing-home sales began to diverge based on previous assumptions,” Yun said.
NAR consumer survey data in 2000 showed FSBOs accounted for a 16 percent market share, which fell to a record low 9 percent in 2010.
“In essence, Realtors® began to capture a greater market share. In addition to a decline in FSBO transactions, more builders began marketing new properties through real estate brokers that weren’t completely filtered from the existing-home data,” Yun said. “Some property listings on more than one MLS, and issues related to house flipping, also contributed to the downward revisions.” The new independent benchmark was discussed with government agencies and outside housing market experts, and will allow for annual revisions in the future.
Total housing inventory at the end of November fell 5.8 percent to 2.58 million existing homes available for sale, which represents a 7.0-month supply4 at the current sales pace, down from a 7.7-month supply in October. “Since setting a record of 4.04 million in July 2007, inventories have trended down and supplies are moving close to price stabilization levels,” Yun said.
The national median existing-home price5 for all housing types was $164,200 in November, down 3.5 percent from a year ago. Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 29 percent of sales in November (19 percent were foreclosures and 10 percent were short sales), compared with 28 percent in October and 33 percent in November 2010.
All-cash sales accounted for 28 percent of purchases in November; they were 29 percent in October and 31 percent in November 2010. Investors make up the bulk of cash transactions.
Investors purchased 19 percent of homes in November, little changed from 18 percent in October and 19 percent in November 2010. First-time buyers accounted for 35 percent of transactions in November, up from 34 percent in October and 32 percent in November 2010.
Single-family home sales rose 4.5 percent to a seasonally adjusted annual rate of 3.95 million in November from 3.78 million in October, and are 12.9 percent above the 3.50 million-unit level in November 2010. The median existing single-family home price was $164,100 in November, down 4.0 percent from a year ago.
Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 470,000 in November and are 6.8 percent higher than the 440,000-unit pace one year ago. The median existing condo price6 was $164,600 in November, which is 0.2 percent below November 2010.
Regionally, existing-home sales in the Northeast jumped 9.8 percent to an annual pace of 560,000 in November and are 7.7 percent above a year ago. The median price in the Northeast was $240,200, which is 0.1 percent below November 2010.
Existing-home sales in the Midwest rose 4.3 percent in November to a level of 960,000 and are 15.7 percent higher than November 2010. The median price in the Midwest was $133,400, down 4.0 percent from a year ago.
In the South, existing-home sales increased 2.4 percent to an annual pace of 1.74 million in November and are 12.3 percent above a year ago. The median price in the South was $143,300, which is 2.1 percent below November 2010.
Existing-home sales in the West rose 3.6 percent to an annual level of 1.16 million in November and are 11.5 percent higher than November 2010. The median price in the West was $195,300, down 8.4 percent below a year ago.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
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NOTE: NAR also tracks monthly comparisons of existing single-family home sales and median prices for select metropolitan statistical areas, which is posted with other tables at: www.nar.realtor/research/research/ehsdata. For information on areas not included in the report, please contact the local association of Realtors®.
1Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 to 90 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.
2 Contract failures, all-cash transactions, investors, first-time buyers, and distressed sales are from a monthly survey for the Realtors® Confidence Index, posted at nar.realtor.
3Periodic benchmark revisions have been made to historic data back through 2007. Although there are downward revisions for total sales, there is little change to previously reported monthly comparisons or characterizations based on percentage change. There are comparable downward revisions to unsold inventory, so there is no change to relative month’s supply. Also, there is no change to median home prices.
A divergence in sales projections developed over time between the fixed model for calculating annualized sales rates and the actual marketplace, including a decline in for-sale-by-owner transactions, growth in multiple listing service coverage areas, geographic population shifts, some new-home sales trickling into MLS data and some individual sales being recorded in more than one MLS. Divergence of the data with other housing data metrics began in 2007.
NAR began to capture a larger share of actual transactions than was assumed in the calculation model based on the 2000 Census; resolving these issues has taking longer than anticipated in the absence of decennial data from the U.S. Census Bureau, which are no longer collected. Other major statistical series such as Gross Domestic Product and employment figures go through comparable periodic benchmark revisions to produce the most accurate data possible; the new benchmark process will permit annual revisions.
NAR began its normally scheduled process for benchmarking sales at the beginning of 2011 in consultation with outside housing market experts. Data for the new benchmark was discussed with representatives of organizations including the Federal Reserve Board, U.S. Treasury, Department of Housing and Urban Development, Freddie Mac, Fannie Mae, Mortgage Bankers Association, National Association of Home Builders, CoreLogic, etc.; and some individual economists.
The data and background are posted at https://www.nar.realtor/research/research/ehs_benchmarking.
4Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, condos were measured quarterly while single-family sales accounted for more than 90 percent of transactions).
5The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
6Because there is a concentration of condos in high-cost metro areas, the national median condo price often is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
The Pending Home Sales Index for November will be released December 29, and existing-home sales for December is scheduled for January 20; release times are 10:00 a.m. EST.