WASHINGTON (12/20/13)--The real estate market cooled for the third straight month in November, according to a report published Thursday by the National Association of Realtors (NAR).
Total existing-home sales fell by 4.3% to a seasonally adjusted annualized rate of 4.9 million, down from 5.12 million in October. The decline brought sales down on a year-over-year basis by 60,000--the first annual decline in 29 months.
A MarketWatch analysis based on a survey of economists predicted that November sales would slow to an annualized pace of 5 million (MarketWatch Dec. 19). Moody's analysts also forecast a smaller monthly decline (Economy.com Dec. 19).
Single-family home sales fell by 3.8% to an annualized rate of 4.32 million, down 0.9% on a year-over-year basis, while existing condominium and co-op sales fell by 7.9% to an annualized rate of 580,000 units, down from 630,000 in October and 600,000 in November 2012.
The national median price for existing homes of all types was $196,300--up 9.4% on an annual basis but less than the 11.6% year-over-year increase in October. The median price for existing single-family homes was also up by 9.4% on an annual basis to $196,200. The median price for existing co-ops and condominiums was $197,400, up by 10% from November 2012.
All four census regions reported a decline in monthly sales. The West and Midwest saw sales drop by 8.5% and 4.1%, while the Northeast and South saw contractions of 3% and 2.4%.
NAR Chief Economist Lawrence Yun said that higher interest rates, shrinking inventory and tightening credit markets have caused demand and supply to move in opposite directions, causing rent prices and annual home prices to appreciate at their fastest levels in five and eight years, respectively.
The total inventory of houses for sale declined by 0.9% to 2.09 million. Homes were on the market for a median time of 56 days, up from 54 days in October, and down from 70 days on a year-over-year basis.
The supply decline can partially be attributed to a drop-off in distress sales, which accounted for 14% of all transactions--unchanged from October, but down from 22% of all sales in November 2012.
Freddie Mac data cited by NAR showed that the national average for 30-year conventional fixed-rate mortgages rose to 4.26%, from 4.19% in October--an increase from 3.35% in November 2012.
Moody's analysts said that demand is being propped up by investors and cash-purchases, which accounted for 32% of transactions in November--up from 31% in October and 30% in November 2012. Seven out of 10 investors paid for residential assets in cash.
A MarketWatch analysis suggested that existing-home sales could pick up next year, if the labor market improves, and lenders compete to bring up dropping mortgage applications.
Housing inventories are also expected to increase, according to Commerce Department data for November that was released Wednesday. Construction started on 1.09 million houses last month--an increase of 22.7% from October, and the greatest one-month expansion since early 2008. Permits issued for one-unit dwellings, the most stable and largest component of the housing market, were up by 2.1% (Market News Dec. 19).
Growing inventory could reverse the recent increase in prices and kickstart demand, according to both MarketWatch and Moody's.
The Federal Reserve drawing down its monthly purchase of assets from $85 billion to $75 billion could lead to higher mortgage interest rates, MarketWatch pointed out. Moody's said that a sudden rise in rates--which have steadily increased since May--is the "primary threat" to the housing recovery.
MarketWatch also pointed out that impending changes to federal regulations and subsidies add an element of uncertainty to predictions. There are plans to lower limits for mortgages backed by federal tax dollars, and Congress is currently discussing how to reform Fannie Mae and Freddie Mac.
NAR President Steve Brown, a realtor in Dayton, Ohio, also noted that the federal qualified mortgage rule is set to go into effect in January--a change that will likely mean lower delinquency rates, but more stringent prerequisites for home financing.