Existing Home Sales Post Largest Gains Since 2015

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Existing home sales pulled off a hat
trick in November, and the third successive monthly increase was a substantial one.  The National Association of Realtors® (NAR)
says sales rose 5.6 percent from October to November, reaching their strongest
pace in nearly 11 years.

Sales of existing single-family
homes, townhomes, condos, and cooperative apartments were at a seasonally
adjusted annual rate of 5.81 million, up from a revised (from 5.48 million)
5.50 million sales in October. The increase brought sales to a level 3.8
percent higher
than in November 2015, and the highest since December 2006.

(As a technical aside, NAR says the November
increase is the largest monthly gain since December 2015 when the rate of sales
jumped 12.1 percent.  This was due in
part to delayed closings resulting from the rollout of the Know Before You Owe
initiative.)

Analysts polled by Econoday were not
expecting such strong results
following the previous two months of gains. They
were looking for results in the range of 5.43 million to 5.77 million with a consensus
of 5.44 million.

There was a 4.5 percent increase in
single-family home sales
to an annual rate
of 5.09 million from 4.87 million in October. Those sales are now up 3.2
percent from last November’s 4.93 million-unit pace.  Sales of existing condominium and co-op units
jumped by 14.3 percent to a seasonally adjusted annual rate of 720,000 units in
November, and are now 7.5 percent ahead of last year.

Lawrence Yun,
NAR chief economist, says home sales in most of the country expanded at a tremendous
clip in November. “Faster economic growth in recent quarters, the booming stock
market and continuous job gains are fueling substantial demand for buying a
home as 2017 comes to an end,” he said. “As evidenced by a subdued level of
first-time buyers and increased share of cash buyers, move-up buyers with
considerable down payments and those with cash made up a bulk of the sales
activity last month. The odds of closing on a home are much better at the upper
end of the market, where inventory conditions continue to be markedly
better.”   

The median
existing-home price for all housing types in November was $248,000, a 5.8
percent annual rate of appreciation, from the $234,400 median in November 20.  It was the 69th straight month of
year-over-year gains.

The median price
of an existing single-family home was $248,800, up 5.4 percent from November
2016. The median price of an existing condo unit rose 8.8 percent to $242,500.  

The market continues to
tighten as the available inventory dropped another 7.2 percent by the end of
November.  Total housing inventory is
considered to be a 3.4-month supply at the existing rate of sales, with 1.67
million existing homes for sale.  The
inventory shrunk year-over-year by 9.7 percent, the 30th consecutive
month of annual decreases.  In November
2016 there were 1.85 million homes for sale and a 4.0-month supply.

“The anticipated rise in
mortgage rates next year could further cut into affordability if these staggeringly
low supply levels persist,” said Yun. “Price appreciation is too fast in a lot
of markets right now. The increase in homebuilder optimism must translate to
significantly more new construction in 2018 to help ease these acute inventory
shortages.”

Distressed sales represented
4 percent of sales, as they had for the previous three months.   One year ago, foreclosures and short sales
accounted for 6 percent of sales. This November, 3 percent of sales were
foreclosures and 1 percent were short sales.

First-time buyers accounted
for 29 percent of sales in November, down 3 percentage points both from October
and a year ago. Individual investors bought 14 percent of the homes sold, up
from 13 percent in October.  Twenty-two
percent of home sale transactions were all cash, the highest share since May
and 2 points more than in October.

 “The elevated presence of investors paying in
cash continues to add a layer of frustration to the supply and affordability
headwinds aspiring first-time buyers are experiencing,” said Yun. “The healthy
labor market and higher wage gains are expected to further strengthen buyer
demand from young adults next year. Their prospects for becoming homeowners
will only improve if more lower-priced and smaller-sized homes come onto the
market.” 

Typical marketing time
in November was 40 days, up from 34 days in October. Forty-four percent of
homes sold in November were on the market for less than a month.

On the topic of tax
reform, NAR President Elizabeth Mendenhall, says it’s good news that homeowners
can continue to count on tax incentives such as the mortgage interest deduction
and the state and local tax deduction if the proposed bill becomes law.

“Only 6 percent of
homeowners have mortgages exceeding $750,000, and only 5 percent pay more than
$10,000 in property taxes, but most homeowners won’t itemize under the new
regime,” she said. “While we’re pleased that important homeownership incentives
such as the capital gains exclusion survived in conference, additional changes
are required to truly incentivize homeownership in the tax code.”

Sales were strong in
every region but the West.  Sales of
existing homes jumped 6.7 percent in the Northeast, to an annual rate of
800,000, matching the November 2016 rate. The median price in the region was
$273,600, a 4.0 percent annual increase.  

The Midwest
performed even better, with sales surging 8.4 percent to an annual rate of 1.42
million.  Sales are now 6.8 percent above
a year ago. The median price was $196,100, up 8.8 percent.

Existing-home
sales in the South expanded 8.3 percent to an annual rate of 2.34 million, a
4.0 percent year-over-year gain. The median price grew 4.8 percent to $216,200.

The West saw
sales decline
by 2.3 percent to an annual rate of 1.25 million, remaining 2.5
percent above a year ago. The median price was $375,100, up 8.2 percent from
November 2016.



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