Existing-home sales edge up in November

/ Source: The Associated Press

Sales of existing homes managed to eke out a small increase in November, but the price of homes sold fell for a record fourth consecutive month a real estate trade group reported Thursday.

The National Association of Realtors reported that sales of previously owned homes rose 0.6 percent in November to a seasonally adjusted annual rate of 6.28 million units. That followed a 0.5 percent sales increase in October and marked the first back-to-back sales gains since the spring of 2005.

The slight increases in sales were not enough to halt a slide in home prices. The median price for an existing home sold in November dropped to $218,000, down 3.1 percent from the price a year ago. It was the first time on record that sales prices compared to a year ago have fallen for four straight months.

The report on existing home sales offered further hope that the serious slump in housing that has occurred this year may be bottoming out.

It followed a report Wednesday that showed that new home sales rose 3.4 percent in November, the third gain in the past four months.

David Lereah, chief economist for the Realtors, said he believed that September’s sales activity may represent the low point for sales this cycle but he cautioned that home prices would probably continue declining for a few more months.

By region of the country, sales were down 1.6 percent in the South and they were unchanged in the Midwest. However, the Northeast posted a strong 6 percent sales gain and the West saw sales rise by 0.8 percent.

The housing industry has been in a severe slump this year after posting five consecutive years of record sales of both new and existing homes.

Lereah said he believed sales of existing homes would fall by 9 percent this year and post a smaller drop of 1 percent in 2007 as the markets undergo a correction following what many economists believe was a real estate speculative bubble.

“We’ve entered a more sustainable period of home sales now and we expect greater support for prices over time as inventory levels are eventually drawn down,” Lereah said.

He predicted price declines would continue in December and probably for the early part of 2007. He said these were necessary adjustments that were luring buyers back into the market.

Even though the economy has slowed significantly this year under the weight of a slumping housing market and weaker consumer spending, employers have been reluctant to lay off workers.

The nation’s unemployment rate stood at 4.5 percent in November, up only slightly from a five-year low of 4.4 percent in October as employers added 132,000 workers to their payrolls.

The overall economy slowed to a growth rate of just 2 percent in the July-September quarter and many analysts believe activity will remain sluggish in the final three months of the year. The slowdown was led by weakness in housing, which had been one of the economy’s standout performers.