Posted on Thursday, December 23, 2010
Sales of existing homes rose in November, but analysts said increased employment and better access to credit were needed before the housing market could achieve a sustained recovery.
The National Association of Realtors said Wednesday that existing-home sales rose 5.6 percent to a seasonally adjusted annual rate of 4.68 million units in November, up from about 4.43 million in October.
Still, the rate was nearly 28 percent below the 6.49 million of November 2009, and below the pace of 4.75 million units that economists surveyed by Bloomberg had expected.
“We are underperforming, given the size of the population,” said Walter Molony, a spokesman for the Realtors association. “Homes sales this year are sub-par. We should be over five million on a sustainable level.”
The November figure, a sharp reversal of the 26 percent plunge in existing-home sales in October, reflects completed transactions for existing single-family homes, town homes, condominiums and co-ops.
In an interview before the report was released, Mr. Molony said the association had forecast that sales of existing homes would expand by more than 6 percent, to 5.12 million, in 2011.
“Our forecast is for a gradual improvement in 2011,” he said. “We need sustained job growth to really kick things into higher gear.”
About five million transactions were concluded in October 2008 during the peak of the financial crisis.
The latest home sales figures followed recent signs that the economy was starting to improve, including lower trends in weekly initial unemployment claims, reports of stronger retail sales in November, and a rise in pending home sales in October of more than 10 percent.
On Wednesday, the Commerce Department revised estimates for annualized third-quarter economic growth to 2.6 percent, from 2.5 percent, partly because of a downward revision to consumer spending on services and an upward revision to inventories.
The overall revision, however, was slightly less than expectations.
“Looking ahead, circumstances are ripe for the economy to develop additional traction,” helped by a jobs recovery and a reduction in the payroll tax in the new tax deal, Joshua Shapiro, the chief United States economist for MFR, said in a research note.
Still, some aspects of the jobs picture look shaky. The November employment report showed that national hiring by businesses slowed to a crawl last month. The unemployment rate rose to 9.8 percent, the highest rate since April and up from 9.6 percent in October.
But home buyers have been drawn into the market for more than a year by the federal tax credit, which caused many people to speed up their planned purchases, and by a glut of foreclosed properties offered at discounted prices. The $8,000 tax credit expired early this year, affecting existing-home sales, which dipped to 3.84 million in July, the lowest level in 14 years.
Sal Guatieri, senior economist for BMO Capital Markets, said that with the expiration of the credit, it would take a stronger economy to chip away at the stock of houses for sale, which amounted to 3.71 million at the end of November, a 9.5-month supply.
“The No. 1 thing would be a sharp increase in employment,” Mr. Guatieri said. “Hiring has been disappointingly slow, and I think that is the main reason that the housing market has been on tenterhooks.”
“We are moving in the right direction,” he said. “It is just a matter of sustaining that pace.”
The housing report said that sales of homes rose most in the West, increasing 11.7 percent to an annualized rate of 1.15 million units at the end of November. The median price in the region was up less than half a percent compared with a year ago, at $212,500. In the Midwest, sales were up 6.4 percent; in the South, sales rose 2.9 percent, and in the Northeast, 2.7 percent.
“The West’s stronger performance might be due to distressed properties, which account for a larger share of sales in three Western states — California, Arizona and Nevada — than they do in most other states,” said Patrick Newport, United States economist for IHS Global Insight.
The report said median prices fell in the South and the Midwest, but they showed the highest rise in the Northeast, where they were up 9.2 percent.
In general, a drop in prices and in mortgage rates have helped to make houses more affordable in recent months.
The report said the national median existing home price for all housing types was $170,600 in November, slightly higher than in 2009. Distressed homes, of which two-thirds were foreclosures, accounted for 33 percent of all existing-home sales last month, the same is in November 2009.
Mr. Newport said that access to credit was a key issue for the future of the housing sector. But the report said there were signs that home ownership was becoming more affordable for many people with the falling rates and prices. According to the N.A.R.’s housing affordability index, families earning a median income of $62,141 needed to devote only 13.6 percent of that to housing in October.
“The relationship recently between mortgage interest rates, home prices and family income has been the most favorable on record for buying a home since we started measuring in 1970,” Lawrence Yun, the Realtor association’s chief economist, said. “Therefore, the market is recovering and we should trend up to a healthy, sustainable level in 2011.”
Housing affordability in the United States has rarely been better, Mr. Guatieri said. “It is the No. 1 reason we are expecting the housing market to recover — prices are low relative to incomes.”
“All we need is a return to solid job growth,” he said, “to spark a fire in the housing market.”
By CHRISTINE HAUSER NYT