Home Buyer Incentives More Important Than Ever, NAR Says
RISMEDIA, Dec. 24, 2008-Existing-home sales weakened against a backdrop of an eroding economy, according to the National Association of Realtors®. Existing-home sales – including single-family, townhomes, condominiums and co-ops – fell 8.6% to a seasonally adjusted annual rate of 4.49 million units in November from a downwardly revised level of 4.91 million in October, and are 10.6% below the 5.02 million-unit pace in November 2007.
Lawrence Yun, NAR chief economist, expected a decline. “The quickly deteriorating conditions in the job market, stock market, and consumer confidence in October and November have knocked down home sales to another level. We hope the home sales impact from the stock market crash turns out to be short-lived, as was the case in 1987 and 2001,” he said.
“It is, therefore, imperative to provide incentives for home buyers to get back into the market. It also depends on how effectively Congress and the new administration can help facilitate the short sales process and unclog the mortgage pipeline – impediments remain for some buyers with good credit,” Yun said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 6.09% in November from 6.20% in October; the rate was 6.21% in November 2007. Last week, Freddie Mac reported the 30-year rate fell to 5.19% – the lowest on record since the series began in 1971.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said it’s crucial to enact sufficient housing stimulus to spark an economic recovery. “We need more than low interest rates to encourage enough buyers to enter the market and meaningfully draw down inventory, which would stabilize home prices – that, in turn, would help the economy to recover,” he said.
“We should extend the first-time buyer tax credit to all home buyers and eliminate the repayment feature, and make permanent the higher loan limits that are vital in high-cost markets – the faster we do this, the faster housing and the economy can recover,” McMillan said.
McMillan said NAR is grateful that the Treasury, the Federal Housing Finance Agency and the Federal Reserve have been working to bring interest rates down on most mortgages to historic lows.
Total housing inventory at the end of November rose 0.1% to 4.20 million existing homes available for sale, which represents an 11.2-month supply at the current sales pace, up from a 10.3-month supply in October.
Despite an overall softening in sales, there has been a solid trend of rising activity in California, Nevada, Arizona and Florida markets. “Sales are rising only in areas with large numbers of distressed properties as bargain hunters take advantage of discounted home prices,” Yun said.
The national median existing-home price for all housing types was $181,300 in November, down 13.2% from November 2007 when the median was $208,800. There remains a significant downward distortion in the current price from a large number of distress sales at discounted prices; the median is where half of the homes sold for more and half sold for less.
Yun cautioned that there will be negative consequences if housing stimulus is delayed. “Falling home prices would lead to faster contraction in consumer spending and further deterioration in bank balance sheets. More importantly, falling home values would lead to higher loan defaults, including those recently modified distressed mortgages.”
Single-family home sales fell 8.0% to a seasonally adjusted annual rate of 4.02 million in November from a level of 4.37 million in October, and are 8.8% below a 4.41 million-unit pace a year ago. The median existing single-family home price was $180,800 in November, down 12.8% from November 2007.
Existing condominium and co-op sales dropped 13.0% to a seasonally adjusted annual rate of 470,000 units in November from 540,000 in October, and are 23.1% below the 611,000-unit pace in November 2007. The median existing condo price4 was $185,400 in November, down 15.5% from a year ago.
Regionally, existing-home sales in the Northeast dropped 12.0% to an annual pace of 730,000 in November, and are 18.0% lower than a year ago. The median price in the Northeast was $257,700, down 0.1percent from November 2007.
Existing-home sales in the Midwest fell 7.4% in November to a pace of 1.00 million and are 16.0% below November 2007. The median price in the Midwest was $142,400, down 11.2% from a year ago.
In the South, existing-home sales dropped 10.9% to an annual pace of 1.64 million in November, and are 17.6% below a year ago. The median price in the South was $154,500, which is 10.6% lower than November 2007.
Existing-home sales in the West declined 4.3% to an annual rate of 1.12 million in November but are 17.9% higher than November 2007. The median price in the West was $242,500, down 25.5% from a year ago.
For more information, visit www.Realtor.org.