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Existing Home Sales Tumble as New Loan Rules Take Effect

Paul Ausick

The National Association of Realtors (NAR) reports that the seasonally adjusted annual rate of existing home sales in November fell 10.5% to a seasonally adjusted annual rate of 4.76 million from a downwardly revised total of 5.32 million in October.

November sales mark the first time since September of 2014 that existing home sales have fallen compared with year-ago sales in the same month. Sales are now 3.8% lower than in November 2014.

The consensus estimate called for sales to reach 5.32 million, according to a survey of economists polled by Bloomberg.

The sharp decline could be the result of implementation of a new "Know Before You Owe" rule that extends the closing time on new loans. The NAR's chief economist said:

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Sparse inventory and affordability issues continue to impede a large pool of buyers' ability to buy, which is holding back sales. However, signed contracts have remained mostly steady in recent months, and properties sold faster in November. Therefore it's highly possible the stark sales decline wasn't because of sudden, withering demand.

It's possible the longer timeframes pushed a latter portion of would-be November transactions into December. As long as closing timeframes don't rise even further, it's likely more sales will register to this month's total, and November's large dip will be more of an outlier.

Housing inventory decreased by 3.3% in November to 2.04 million homes, which is equal to a supply of 5.1 months, an increase of 0.3 months compared with October, but 1.9% lower than the 2.08 homes in inventory in November of last year.

According to the NAR, the national median existing home price for all housing types in November was $220,300, up 6.3% compared with November 2014, the 45th consecutive month of rising home prices. In September the national median price was $219,600.

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The percentage of first-time buyers slipped to 30% in November, down from 31% in October.

Sales of single-family homes fell 12.1% from the October total to a seasonally adjusted annual rate of 4.15 million, down 4.6% compared with November a year ago. Sales of multi-family homes rose 1.7% in November at a seasonally adjusted annual rate of 610,000 units.

Foreclosed and short sales accounted for 9% of November sales, up from 6% in October and flat with November of 2014. Foreclosures and short sales both sold at an average 15% discount to the November median price.

All homes were on the market for an average of 54 days in November, down from 57 days in October. Foreclosed homes were on the market for an average of 47 days, and short sales took a median of 91 days to sell. Non-distressed homes took 54 days to sell, and 37% of homes sold in November were on the market for less than a month.

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The NAR also reported the following regional data:

  • November existing-home sales in the Northeast fell 9.2% year over year to an annual rate of 690,000 and are now 1.5% above a year ago. The median price in the Northeast was $254,800, which is 3.2% higher than November 2014.
  • In the Midwest, existing-home sales plunged 15.4% to an annual rate of 1.1 million in November and fell 2.7% below November 2014 sales. The median price in the Midwest was $169.300, up 5.3% from a year ago.
  • Existing-home sales in the South fell 6.2% to an annual rate of 1.98 million in November and are now 5.7% below November 2014 sales. The median price in the South was $489,400, up 6.3% from a year ago.
  • Existing-home sales in the West decreased by 13.9% to an annual rate of 990,000 in November and are now 4.2% lower than a year ago. The median price in the West was $319,700, which is 8.3% above the November 2014 median.

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