Sales of the largest category of U.S. homes dropped more than forecast in November falling below five million annual units for the first time since May, despite low mortgage rates and a steady job market.
Purchases of previously occupied homes fell 6.1 percent to a 4.93 million annual rate from 5.25 million in October, which had been the highest pace since September 2013, according to statistics from the National Association of Realtors. Economists surveyed by Bloomberg News predicted a 1.1 percent decline to 5.20 million units. It was the largest monthly drop since July 2010. Sales were 2.1 percent higher on the year.
Mortgage costs have been trending lower over the past year after the rate for a 30-year fixed loan reached a peak of 4.67 percent in September 2013. The 21 day moving average has declined from the high of 4.53 percent that month to 4.03 percent on December 16th.
Thursday’s nationwide average of 4.12 percent was up slightly from November 28th recent low of 3.92 percent, according to Bankrate.com.
The median price of an existing home rose 5 percent in November to $205,300 for the 33rd straight month of prices gains.
Sales declined in all fours areas of the country; in the Northeast they fell 4.2 percent; in the Midwest 8.9 percent; in the south 3.2 percent and in the West 9.6 percent.
The number of available properties on the market shrank 6.7 percent to 2.09 million in November. At the month’s selling rate it would take 5.1 months to clear the inventory, the same as in October.
Purchases of single-family homes, the arbiter of long term health in the housing market slipped 6.3 percent on the month and the length of time on the market for properties rose to 65 days form 56 days on the year. Condominium purchases dropped 4.8 percent.
New construction has slowed as well. The Commerce Department last week reported that housing starts tumbled 1.6 percent in November to a 1.03 million annual rate. Building permits dropped 5.2 percent to a 1.035 million pace, making it unlikely that construction will pick-up in the immediate future.
Some housing analysts have speculated the relative dearth of inexpensive new homes has prevented first-time buyers from entering the market.
First time buyers accounted for 31 percent of sales in November, the highest portion in two years. Stricter lending standards may also be preventing some young or initial buyers from completing purchases
The labor market has been a somewhat disappointing support for home sales. Even though businesses have added more than 200,000 jobs each month since February, and the unemployment rate has fallen to at six year low at 5.8 percent, home purchases have yet to regain the annual average of 5.81 million units of the five years from 2000 to 2004, in spite of the increase in population. One possibility is the high percentage of part-time employment among the new positions has prevented potential buyers from obtaining mortgages.
All cash sales, an indicator of investor interest of homes bought for later resale, were 25 percent of all transactions in November, down from 27 percent in October and 32 percent in November last year.
The all-time low in mortgage rates of 3.36 percent was in December 2012 as the Federal Reserve’s $85 billion a month of direct purchases in the credit markets forced commercial rates to their historic nadir.
Chief Market Strategist
WorldWideMarkets Online Trading