The housing market weakened in November, according to the National Association of Realtors (NAR). Sales of existing homes dropped more than 10% to an annualized rate of 4.76 million homes. Sales were 3.6% below those of November, 2014.
NAR’s chief economist, Lawrence Yun, attributed some of the downturn to delays in closings that pushed many of them into December. Mortgage disclosure rules now in effect are lengthening the time between contract and closing. Nearly half of realtors surveyed by NAR reported longer closing times in November.
But Yun also blamed the drop on a shortage of listings, making it harder for buyers to find suitable homes. That has caused competition for available homes to heat up and prices to go up. The national median price for homes sold during the month was $220,300, the 45th consecutive straight month that prices rose year-over-year.
“Sparse inventory and affordability issues continue to impede a large pool of buyers’ ability to buy, which is holding back sales,” he said.
It’s not lack of demand. A recent survey from NAR reported that nearly all young renters want to buy homes and most people still consider homeownership part of their American Dream. Agents report their biggest problem is finding appropriate listings for house hunters ready to buy.
The weak sales run counter to the increasing stability of the economic recovery. Hiring has been strong and the unemployment rate has dropped 0.8 percentage points, to 5% over the past 12 months. Wages have increased 1.6% over that same period.
The Federal Reserve has judged conditions strong enough to begin to wean the nation off the low Fed funds interest rate, which it has kept at near zero since late 2008 in an effort to bolster the economy. During that period, rates on mortgages have rarely poked above the 5% mark for a 30-year, fixed rate loan and have fallen, at times, below 3.5%. That made home buying much more affordable.
“The Fed rate rise is no big deal,” said Keith Gumbinger, vice president of HSH.com, a provider of mortgage information. “There has been no change in long-term rates. Fed funds rate and mortgage rates have little to do with each other.”
Mortgage rates correlate much more closely with Treasury rates, which have actually fallen since the Fed announced its hike. Gumbinger expects mortgage rates will go up very slowly over the next year and will remain attractive for some time.
The shortage of inventory was especially acute in the West, where sales fell nearly 14% compared with October and were down 4.8% from a year earlier. It’s also the most expensive region, at a median price of $319,700 during the month.
In the Northeast, sales fell 9.2% from October but are 1.5% higher than last year. Homes sold at a median of $254,800. Midwestern sales plummeted 15.4%, at a median of $169,300. Sales were down 2.7% from a year ago. In the South, sales recorded a 6.2% decline from October and 5.7% from last year. The median of $189,400 was up 6.3% from November 2014.
