Homes Sales Rise in November

By:
Kara Johnson | December 22, 2010

Existing home sales rose in November, increasing a seasonally adjusted 5.6 percent as the housing market continues to shake off the aftereffects of the homebuyer tax credit.

Sales increased to an annualized rate of 4.68 million homes, resuming their upward climb following a brief downturn in October, according to figures released today by the National Association of Realtors (NAR). Sales have gradually been coming back after plummeting to a rate of 3.84 million units in July following the expiration of the tax credit, which pulled forward much of the existing housing demand.
 
“Continuing gains in home sales are encouraging, and the positive impact of steady job creation will more than trump some negative impact from a modest rise in mortgage interest rates, which remain historically favorable,” said Lawrence Yun, NAR chief economist.
 
Noting that “home affordability,” a measure of the relationship between home prices, mortgage rates and family incomes, is the highest it’s been in at least 40 years, Yun said the housing market should continue trending upward to a “healthy, sustainable level” over the coming year.
 
Sales increased in all four major regions of the country, with the biggest monthly gain in the West, where sales were up 11.7 percent over October. The Midwest saw a monthly gain of 6.4 percent, while the South and Northeast saw gains of 2.9 percent and 2.7 percent, respectively.
 
Although sales have been trending upward since last July, the housing market continues to struggle with the consequences of the homebuyer tax credits, which gave a strong boost to sales but left little demand remaining after it expired.
 
Compared to November 2009, sales are down 27.9 percent. However, that month marked the expiration of the original deadline for the credit, which inflated sales to an annualized rate of 6.49 million units that month, the peak under the credit. With the credit extended through June, sales ranged from 5.0-5.8 million in subsequent months until falling off in July after the credit ended.
 
Despite sharply lower sales, home prices actually increased slightly on an annual basis, increasing 0.4 percent since November 2009, to an average of 170,600. The increase is likely due to a lower percentage of first-time homebuyers, who were drawn in by the credit and who tend to buy less expensive homes.
 
First-time buyers accounted for 32 percent of all homes bought in November, down from 51 percent in November 2009. Investors accounted for 19 percent of all purchases, up from 12 percent one year ago.

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