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Existing-Home Sales Suffer Setback in November, Fall to Slowest Pace Since April 2014

Media Contact: Adam DeSanctis / 202-383-1178 / Email

WASHINGTON (December 22, 2015) — Existing-home sales dropped off considerably in November to the slowest pace in 19 months, but some of the decrease was likely because of an apparent rise in closing timeframes that may have pushed some transactions into December, according to the National Association of Realtors®. All four major regions saw sales declines in November.

Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 10.5 percent to a seasonally adjusted annual rate of 4.76 million in November (lowest since April 2014 at 4.75 million) from a downwardly revised 5.32 million in October. After last month's decline (largest since July 2010 at 22.5 percent), sales are now 3.8 percent below a year ago — the first year-over-year decrease since September 2014.

Lawrence Yun, NAR chief economist, says multiple factors led to November's sales decline, but the primary reason could be an anomaly as the industry adjusts to the new Know Before You Owe rule. "Sparse inventory and affordability issues continue to impede a large pool of buyers' ability to buy, which is holding back sales," he said. "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."

According to Yun, although Realtors® are adjusting accordingly to the Know Before You Owe initiative, the main takeaway so far has been the need for longer closing times. According to NAR's Realtors® Confidence Index, 47 percent of respondents in November reported that they are experiencing a longer time to close compared to a year ago, up from 37 percent in October.

"It's possible the longer timeframes pushed a latter portion of would-be November transactions into December," says Yun. "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."

The median existing-home price2 for all housing types in November was $220,300, which is 6.3 percent above November 2014 ($207,200). November's price increase marks the 45th consecutive month of year-over-year gains.

Total housing inventory3 at the end of November decreased 3.3 percent to 2.04 million existing homes available for sale, and is now 1.9 percent lower than a year ago (2.08 million). Unsold inventory is at a 5.1-month supply at the current sales pace, up from 4.8 months in October.

"Realtors® worked hard to prepare for Know Before You Owe, and we knew there would be some near-term challenges as the industry continues to adapt," says NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. "Nonetheless, an early trend of longer lead times to closings is cause for concern. As Realtors® report issues with their transactions, we will continue to work with the Consumer Financial Protection Bureau to ensure as little disruption as possible to the business of real estate."

Properties typically stayed on the market for 54 days in November, a decrease from 57 days in October and below the 65 days in November 2014. Short sales were on the market the longest at a median of 91 days in November, while foreclosures sold in 47 days and non-distressed homes took 54 days. Thirty-seven percent of homes sold in November were on the market for less than a month.

The percent share of first-time buyers was at 30 percent in November, down from 31 percent both in October and a year ago. Despite first-time buyers' continued absence from the market, NAR's inaugural quarterly Housing Opportunities and Market Experience survey — released earlier this month — found that an overwhelming majority of current renters who are 34 years of age or younger want to own a home in the future (94 percent). The top reason given by renters for not currently owning was the inability to afford to buy.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage hovered below 4 percent for the fourth consecutive month but increased in November to 3.94 from 3.80 percent in October. A year ago, the average commitment rate was 4.00 percent.

"The Federal Reserve's decision this month to raise short-term rates is the first of many increases over the next couple of years," says Yun. "Although this first move will likely have minimal impact on mortgage rates, additional hikes will push borrowing costs to around 4.50 percent by the end of next year. With home prices expected to continue rising, wages and new home construction need to start increasing substantially to preserve affordability."

Matching the highest share since January, all-cash sales rose to 27 percent of transactions in November (24 percent in October) and are also up from 25 percent a year ago. Individual investors, who account for many cash sales, purchased 16 percent of homes in November (also the highest since January), up both from 13 percent in October and 15 percent a year ago. Sixty-four percent of investors paid cash in November.

Distressed sales4 — foreclosures and short sales — climbed to 9 percent in November, up from 6 percent in October but unchanged from a year ago. Seven percent of November sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 15 percent below market value in November (18 percent in October), while short sales were discounted 15 percent (8 percent in October).

Single-family and Condo/Co-op Sales

Single-family home sales dropped 12.1 percent to a seasonally adjusted annual rate of 4.15 million in November from 4.72 million in October, and are now 4.6 percent lower than the 4.35 million pace a year ago. The median existing single-family home price was $221,600 in November, up 6.6 percent from November 2014.

Existing condominium and co-op sales increased 1.7 percent to a seasonally adjusted annual rate of 610,000 units in November from 600,000 in October, and are now 1.7 percent above November 2014 (600,000 units). The median existing condo price was $211,400 in November, which is 4.7 percent above a year ago.

Regional Breakdown

November existing-home sales in the Northeast declined 9.2 percent to an annual rate of 690,000, but are still 1.5 percent above a year ago. The median price in the Northeast was $254,800, which is 3.2 percent above November 2014.

In the Midwest, existing-home sales descended 15.4 percent to an annual rate of 1.10 million in November, and are now 2.7 percent below November 2014. The median price in the Midwest was $169,300, up 5.3 percent from a year ago.

Existing-home sales in the South decreased 6.2 percent to an annual rate of 1.98 million in November, and are now 5.7 percent below November 2014. The median price in the South was $189,400, up 6.3 percent from a year ago.

Existing-home sales in the West dropped 13.9 percent to an annual rate of 990,000 in November, and are now 4.8 percent lower than a year ago. The median price in the West was $319,700, which is 8.3 percent above November 2014.

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NOTE: For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.

1Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR rebenchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.

Existing-home sales, based on closings, differ from the U.S. Census Bureau's series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample — about 40 percent of multiple listing service data each month — and typically are not subject to large prior-month revisions.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

2The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.

The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR's quarterly metro area price reports.

3Total inventory and month's supply data are available back through 1999, while single-family inventory and month's supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).

4Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR's Realtors® Confidence Index, posted at Realtor.org.

NOTE: NAR's Pending Home Sales Index for November will be released December 30, and Existing-Home Sales for December will be released January 22; release times are 10:00 a.m. ET.