A Bloomberg survey had expected November existing-home sales to reach an annual rate of 4.75 million units. Existing home sales were at rates of 4.53 million and 4.12 million in September and August, respectively.
Further, sales are down 27.9% from a year ago in November 2009 -- worse than the 25.9% year-over-year decline registered in October 2009.
Two Bright Spots
There were, however, two modest bright spots in the November report. First, home inventories fell 4.0% to 3.71 million units, or a 9.5-month supply at the current sales pace, down from a 10.5-month supply in October. A healthy resale market has a three- to five-month supply of homes. Also, the 3.71-million-unit inventory is slightly less than double the 30-year average of about 2.0-million-units.
A return of inventories to normal levels is important because it's one key to stabilizing home prices, and the resumption of healthy home value appreciation rates of 4% to 7% per year.
The second bright spot: Existing home sales rose in every U.S. region. Sales increased 2.7% in the Northeast, 6.4% in the Midwest, 2.9% in the South, and 11.7% in the West.
NAR Expects Housing Recovery to Continue in 2011
NAR Chief Economist Lawrence Yun said even though sales increases this autumn have been slightly disappointing, he's emphasizing the impact of likely stronger job growth in 2011.
"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," Yun said, in a statement. "The relationship recently between mortgage interest rates, home prices, and family income has been the most favorable on record for buying a home since we started measuring in 1970, Therefore, the market is recovering and we should trend up to a healthy, sustainable level in 2011."
The median sales price for a condominium was $165,300 in November, down 5.5% from a year ago, and worse than the 4.2% year-over-year decline recorded in October.
The median sales prices for all types of housing in November, by region, were as follows: Northeast, $242,500, up 9.2% from a year ago; Midwest, $138,900, down 1.1%; South, $148,000, down 2.6%; and the West, $212,500, up 0.4%.
Economists and market analysts closely follow the monthly existing-home sales statistic because previously owned homes account for the bulk of U.S. home sales. Moreover, the U.S. housing sector does not operate in a vacuum. When homes are sold, homeowners tend to buy durable goods and big ticket items for the new home: furniture, appliances, landscaping equipment and home care supplies, etc. -- an uptrend in each of which is good news for the economy and bullish for U.S. stock markets.
Existing Home Sales: Key to Housing Sector Recovery
November's existing-home sales report was only a small step forward. Sales did rise in November, but economists and investors were looking for a larger increase.
Further, investors should keep in mind that existing-home sales will shoulder a greater portion of the "GDP growth burden" regarding the housing sector. The reason? New home sales are at or near all-time lows, as builders are reluctant to add to supply amid horrible new home sales demand. Existing home sales will have to increase substantially for the housing sector to contribute significantly to U.S. GDP growth in 2011.