Existing Home Sales Down Dec., But 2007 5th Highest on Record
Washington, DC, Jan. 24, 2008 - Existing-home sales declined in December following several months of stable activity, with total sales in 2007 at the fifth highest on record, according to the National Assn. of REALTORS®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – slipped 2.2 percent to a seasonally adjusted annual rate(1) of 4.89 million units in December from a pace of 5.00 million in November, and are 22.0 percent below the 6.27 million-unit level in December 2006.
For all of 2007 there were 5,652,000 existing-home sales, the fifth highest year on record; however, the total was 12.8 percent below the 6,478,000 transactions recorded in 2006.
Lawrence Yun, NAR chief economist, said the market is experiencing uncharacteristic weakness. “Home sales remain weak despite improved affordability conditions in many parts of the country, but we could get a quick boost to the market if loan limits are raised in combination with the bold cut in the Fed funds rate,” he said. “Home prices are lower, mortgage interest rates continue to decline and incomes are higher, but many potential buyers are delaying a purchase.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 6.10 percent in December from 6.21 percent in November; the rate was 6.14 percent in December 2006. Last week, Freddie Mac reported the 30-year fixed rate dropped to 5.69 percent. “Although interest rates on jumbo loans have fallen somewhat, they remain well above conventional mortgage rates,” Yun said. “It isn’t surprising that the share of single-family homes selling for more than $500,000 fell to 12.4 percent of transactions in December from 14.2 percent a year ago.”
Total housing inventory fell 7.4 percent at the end of December to 3.91 million existing homes available for sale, which represents a 9.6-month supply (3) at the current sales pace, down from a 10.1-month supply in November. “The fall in inventory in December is encouraging, but inventories remain elevated and buyers have a clear edge over sellers in many markets,” Yun said.
Median Home Price Declines
The national median existing-home price (2) for all housing types was $208,400 in December, down 6.0 percent from a year earlier when the median was $221,600. Because home sales have slowed the most in higher cost markets, there is a downward distortion to the national median as the mix of closed sales has changed over the past year. For all of 2007, the median price was $218,900, down 1.4 percent from a median of $221,900 in 2006.
NAR President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, CA., said that raising the loan limit on conventional financing is urgently needed. “The most effective way to stimulate housing and minimize the potential for a recession is for lawmakers to raise the limit on conforming mortgages to $625,000, which would open safe and affordable financing to buyers in high-cost areas,” he said. “It is grossly unfair that some Americans do not have access to low-interest rate loans. This would help people as they move away from risky subprime mortgages and high-interest rate jumbo loans.”
NAR projects the higher loan limit would increase annual home sales by nearly 350,000, reduce foreclosures by 140,000 to 210,000, and increase economic activity by $44 billion. “What’s more, this would come at no cost to taxpayers – it’s a policy change that could really boost the economy,” Gaylord said.
Other projections of NAR’s analysis show raising the loan limit would reduce the supply of homes on the market by 1.0 to 1.5 months, and strengthen home prices by 2.0 to 3.0 percentage points. In addition, as many as 500,000 jumbo loans would be refinanced to lower interest rates.
Gaylord said current housing conditions vary widely. “Many local areas continue to have healthy or improving local housing markets,” he said. “For example, we saw higher home sales last month in diverse areas such as San Antonio; Syracuse; Springfield, Ill.; and Sarasota, Fla. If you’re thinking about getting into the market as a buyer or a seller, consult a Realtor® to learn about conditions in your area – they may be considerably different from the composite national picture.”
Single-family home sales declined 2.0 percent to a seasonally adjusted annual rate of 4.31 million in December from 4.40 million in November, and are 21.6 percent below 5.50 million-unit level in December 2006. In all of 2007, single-family sales fell 13.0 percent to 4.94 million.
The median existing single-family home price was $206,500 in December, down 6.5 percent from a year earlier. For all of 2007, the single-family median was $217,800, down 1.8 percent from 2006.
Existing condominium and co-op sales fell 3.3 percent to a seasonally adjusted annual rate of 580,000 units in December from 600,000 in November, and are 24.5 percent below the 768,000-unit pace a year ago. Condo sales for all of 2007 fell 11.0 percent to 713,000 units.
The median existing condo price (4) was $222,200 last month, which is 2.5 percent below December 2006. In all of 2007, the median condo price was $226,400, up 2.0 percent from 2006.
Regionally, existing-home sales in the South slipped 1.0 percent to an annual pace of 1.97 million in December, and are 20.9 percent below December 2006. The median price in the South was $173,400, down 4.1 percent from a year ago. Existing-home sales in the Midwest declined 1.7 percent in December to a level of 1.16 million and are 20.5 percent below a year ago. The median price in the Midwest was $159,800, which is 3.9 percent lower than December 2006. In the West, existing-home sales fell 2.1 percent to an annual rate of 940,000 in December, and are 24.8 percent below December 2006. The median price in the West was $309,800, down 11.1 percent from a year ago. Existing-home sales in the Northeast dropped 4.6 percent to an annual rate of 830,000 in December, and are 22.4 percent below a year ago. The median price in the Northeast was $258,600, down 8.9 percent from in December 2006.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
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(1) 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.
Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs 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 generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
(2) The only valid comparisons for median prices are with the same period a year earlier due to the 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 geographic composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
(3) Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982. Condos were tracked quarterly prior to 1999 when single-family homes accounted for more than nine out of 10 purchases (e.g., condos were 9.5 percent of transactions in 1998, 8.5 percent in 1990 and only 6.1 percent in 1982).
(4) Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
Existing-home sales for January will be released February 25. The next Forecast / Pending Home Sales Index is scheduled for February 7, and fourth quarter metropolitan area median existing-home prices will be released February 14.