Sales of existing homes soar 7.4% in U.S.
The nation’s housing market showed fresh strength in November, as buyers looking to take advantage of a tax credit for first-time purchases pushed up sales of previously owned homes by 7.4%.
The report Tuesday from a real estate trade association helped boost U.S. stock markets, including the blue-chip Dow Jones industrial average, which rose by almost 51 points for its third straight day of gains on signals that the economy may be picking up steam. The bullish housing news outweighed a lackluster productivity report that showed the U.S. economy grew at a sluggish 2.2% annual rate in the third quarter.
Sales of previously owned single-family houses, town homes, condominiums and co-ops rose to a seasonally adjusted annual rate of 6.54 million units in November. That’s the fastest clip in more than two years, according to the National Assn. of Realtors, which compiled the figures based on transaction closings.
The nation’s housing market remains troubled, with foreclosures and mortgage defaults continuing to mount in the face of stubborn unemployment. But home prices are no longer in free fall, having improved steadily in recent months as first-time buyers and investors, motivated by cheap prices and low interest rates, have snapped up bank-owned properties.
“We had a nice little surge,” said Gerd-Ulf Krueger, principal economist at Housingecon.com.
With foreclosures and other distressed properties making up 33% of all resales in November, the median price for previously owned homes inched up 0.2% from the prior month to $172,600, the Realtors group said. That was a 4.3% drop from the same month a year earlier.
A decline in total housing inventory was a bright spot. At the end of November, the supply of previously owned homes on the market dropped 1.3% to 3.52 million units. That represented a 6 1/2 -month supply at the current pace, the lowest since April 2006, the Realtors group said.
“This is overall a pretty good report,” Krueger said. “Particularly encouraging is the fact that the months of supply number is now very much in the comfort zone, where one would expect prices to stabilize.”
The housing market could still lose momentum next year. Mortgage interest rates aren’t likely to remain near their current historic lows indefinitely. Government tax incentives are slated to expire next spring. And a potential glut of foreclosures could put downward pressure on prices.
The Realtors group lobbied heavily for the extension and expansion of a federal tax credit of as much as $8,000 for first-time buyers, which was initially slated to expire Nov. 30. Congress last month extended the subsidy through April and expanded it to include an incentive of as much as $6,500 for some buyers who already own a home.
November’s gain was fueled by buyers looking to grab the incentives ahead of the original expiration, analysts said.
“We project that sales will drop in the first quarter of 2010, payback from the first tax credit,” Patrick Newport, U.S. economist for IHS Global Insight, said in a note to clients Tuesday. “Sales will take a second hit in the third quarter of 2010, payback from the second tax credit. Overall, sales in 2010 will be about the same as in 2009.”
In the West, sales of previously owned homes increased 10.6% in November to a seasonally adjusted annual rate of 1.46 million units, 28.1% higher than a year earlier. The median price rose 5% from the prior month to $231,100 but was still 4.1% less than a year earlier.
In California, sales of single-family homes increased over the prior month by 4.7% in November to a seasonally adjusted annual rate of 536,720 units.
The statewide median price of an existing single-family home rose to $304,520 in November, the California Assn. of Realtors said, a 2.4% increase over the previous month and 5.8% higher than the same month a year earlier.
The median is the point at which half the homes sold for more and half for less.
Many real estate professionals, particularly in Southern California, are optimistic that the sales pace will remain brisk next year. Homes listed at competitive prices have seen multiple offers and swift sales this year, they said.
“I am not surprised the numbers are up nationally, and even in our neck of the woods, because it definitely got notably better,” said agent Simon Salloom, who works in Santa Monica, Brentwood and the Hollywood Hills. “There is optimism and confidence right now that it is a good time to buy.”
Sean Brugger, 38, is one of those potential buyers. The molecular biologist sat out the housing boom as home prices in the L.A. area skyrocketed. Now he and his wife, Amy Merrill-Brugger, 34, a UCLA scientist, are searching for a two-bedroom condo in the $400,000-to-$500,000 price range.
Brugger said a confluence of events motivated him and his wife to begin looking for a home four months ago.
“It’s simple: It’s a need because now we have a child,” he said. “Two, the market is, if it’s not at the bottom, it’s as close to the bottom that it’s probably ever going to be in the next four, five to 10 years.”
Tuesday’s housing news came as the federal Bureau of Economic Analysis said real gross domestic product -- the value of all goods and services produced in the economy -- increased at an annual rate of 2.2%. That’s lower than the bureau’s previous estimate of 2.8%, due in part to downward revisions in consumer spending figures.