Existing Homes Sales Rise!

[MichaelC 160]

Slight Rise in Sales

 

Existing-Home Sales Edged Up

In November, but Still Weak

By JEFF BATER

December 31, 2007 11:37 a.m.

 

WASHINGTON -- Existing-home sales managed a small climb during November, the first increase in nine months, but that didn't change the overall bleak picture for the ailing housing industry.

 

Home resales rose to a 5.00 million annual rate, up 0.4% from October's 4.98 million annual pace, the National Association of Realtors said Monday.

 

The supply of unsold homes fell -- but remained bloated. Analysts see demand for homes receding.

 

"Given stress in the mortgage market and depressed buyer sentiment, we judge this to be a brief respite and look for sales to fall further," Lehman Brothers economist Michelle Meyer said.

 

The housing slump has been a drag on the economy for nearly two years. In the third quarter, the economy roared despite the burden. But in the fourth quarter, which ends with the year, the economy is seen as much weaker, restrained by the dead weight of housing.

 

The November increase in existing-home sales was the first since February 2007. The NAR said disruptions in mortgage availability and pricing peaked in August, which caused sales to slow in subsequent months.

 

"Near term, existing-home sales should continue to hover in a narrow range, just as they have since September, and that's good news because it'll be a further sign that the housing market is stabilizing," NAR chief economist Lawrence Yun said.

 

Data from Freddie Mac show the average 30-year mortgage rate was 6.21% in November, down from 6.38% in October.

 

"Mortgage interest rates are near historic lows and the most current data shows decelerating price declines, along with a modest reduction in the number of homes on the market," Mr. Yun said.

 

The median price of a previously owned home fell 3.3% to $210,200 in November from $217,300 in November 2006.

 

Inventories of homes fell 3.6% at the end of November to 4.27 million available for sale, reflecting a 10.3-month supply at the current sales pace -- high by historical standards. Regionally, existing-home sales were mixed in November. Sales rose 10.3% in the West and were unchanged in the Midwest. Demand fell 2% in the South and 3.3% in the Northeast.

 

"The supply-demand balance remains decidedly unfavorable for pricing," said Haseeb Ahmed, an analyst at JPMorgan Economics.

 

Falling prices tend to discourage people from putting property on the market. And declining home values can also put a chill on consumer spending, which makes up 70% of total economic activity -- people feel less wealthy and spend less, analysts say.

 

"Given the weakness in home prices, the huge inventory of unsold homes, the recent tightening in the mortgage market, and the virtual elimination of the subprime market, further significant declines are coming," Insight Economics chief economist Steven Wood wrote in a note to clients. "The housing correction is definitely not complete."