Existing Home Sales Fall More Than Expected

Existing home sales for November fell 4.3% month-over-month in November, to an annualized pace of 4.9 million.

This missed expectations for a 2% fall to an annualized pace of 5.2 million. This compares with a 3.2% fall to 5.12 million in October.

The national median existing-home price was up 9.4% on the year to $US196,300.

Total housing inventory fell 0.9% to 2.09 million home for sales, which represents a 5.1 month supply at the current sales pace.

Distressed homes accounted for 14% of November sales, unchanged from October, but down from 22% in October.

Bill McBride at Calculated Risk pointed out that a fall in existing home sales could be good, if the decline was led by fewer distressed sales while non-distressed home sales are actually ticking up.

“Home sales are hurt by higher mortgage interest rates, constrained inventory and continuing tight credit,” according to Lawrence Yun, chief NAR economist.

“There is a pent-up demand for both rental and owner-occupied housing as household formation will inevitably burst out, but the bottleneck is in limited housing supply, due to the slow recovery in new home construction. As such, rents are rising at the fastest pace in five years, while annual home prices are rising at the highest rate in eight years.”

Now that the Fed has announced that it is tapering back its asset purchases to $US75 billion a month, down from $US85 billion a month, some like Redfin’s Ellen Haberle think mortgage rates will hit 5% and possibly move higher in the coming weeks, and that this will be a “tough reality check for many homebuyers.”

Rising mortgage rates and the upcoming Qualified Residential Mortgage rules that are expected to bring a lot more scrutiny to process loans have weighed on the series.

Pending home sales, considered a leading indicator for future existing home sales, have been falling sharply. This suggests that existing home sales will be ticking lower.

Existing home sales account for a larger share of the market than new homes.

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