November Existing Home Sales

Joel L. Naroff
President and Chief Economist

INDICATOR: November Existing Home Sales
KEY DATA: Sales: +4.0%; Year-over-Year: 12.2%; Prices (Nov ’10-Nov ‘11): -3.5%;

IN A NUTSHELL: “It turns out the housing collapse was greater than thought but at least the process of digging out from the deep hole is beginning.”

WHAT IT MEANS: The housing market is healing, albeit slowly. Starts are improving and now we see that existing home sales are on the rise. Demand rose solidly in November led by a jump in single-family activity. Condo purchases were flat. The gains were across the nation though there was nearly a double-digit rise in the Northeast. So far in 2011, total sales are running almost two percent above the 2010 level. The increases were pretty evenly distributed between the single-family and condo markets. That said, the level of demand is unbelievably low. The National Association of Realtors revised the data for the period 2007 through 2010 and reduced total sales by over 14% or by about three million fewer sales. In other words, the meteor that cratered the housing market was a lot larger than initially estimated. And you thought the dinosaurs had problems. The reduction is in synch with the larger decline in GDP during the recession that was reported by the Bureau of Economic Affairs. As for prices, they are continuing to slide and for the first eleven months of the year, the median price has dropped nearly 5%, again with condos down a little more than single-family units.

MARKETS AND FED POLICY IMPLICATIONS: While some may concentrate on the huge downward revision to sales, the real story is the current trend in housing demand and that seems to be up a little. When you look at growth, it is the change in activity not the level of activity. Sales bottomed in July and have been moving up fairly steadily since. Unfortunately, the large number of distressed homes being purchased is reducing not only sales but supply as well. People with well-maintained homes know they cannot get their desired price, even if buyers are willing to pay it, as long as distressed homes are used as comps. It looks like these “normal” homeowners are simply keeping their houses off the market and that is reducing the number of homes for sale. That makes the supply of homes number somewhat useless as it implies that once conditions turn around, the ‘for sale’ signs will pop up like crazy. The latent supply is there, the actual supply is not. Regardless, this is another positive report that should make it clear that the economy is heading into 2012 with growing momentum. Unless Europe crashes and burns, and never underestimate the ability of politicians in any part of the world to do the wrong thing, growth in the U.S. next year could be decent. That is my forecast and I am sticking to it, at least for now.
RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
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