Sales of previously owned homes nudged up in November, but that didn’t improve the broader picture of a feeble housing market racked by record-high foreclosures and harder-to-get credit.
The National Association of Realtors reported Monday that sales of existing single-family homes, condominiums and townhouses rose 0.4 percent in November from October, to a seasonally adjusted annual rate of 5 million units. Even with the small increase, the pace of sales was still the second-lowest on record going back to 1999. The lowest pace — 4.98 million — was registered in October.
“There’s little reason to pop open any champagne corks,” said Michael Larson, a real-estate analyst at Weiss Research Inc.
To be sure, sales are down 20 percent from November 2006, underscoring the problems plaguing the housing sector.
Economists were calling for sales to either move up slightly or hold steady for November.
Home prices continued to sink.
The median price of a home sold last month was $210,200. That marked a 3.3 percent drop from a year ago. It was the fifth biggest annual decline on record. The median price is where half sell for more and half sell for less.
On Wall Street, the bump up in nationwide home sales failed to ease investors’ fears about the economy’s outlook. The Dow Jones industrials tumbled 101.05 points to close at 13,264.82. For the year, the Dow managed to post a respectable gain of 6.43 percent.
By region of the country, sales were mixed.
Existing home sales jumped 10.3 percent in November from October in the West. They were flat in the Midwest. However, they fell by 2 percent in the South and by 3.3 percent in the Northeast.
“There is no doubt that housing is weak and will be weak in 2008,” said economist Ken Mayland, president of ClearView Economics.
The inventory of unsold homes in November was 4.27 million homes. At the current sales pace it would take 10.3 months to exhaust that overhang.
“Inventory is still high and further reduction in prices may be required in some areas to induce buyers back into the market,” said the association’s chief economist, Lawrence Yun.
A dip in 30-year mortgage rates in November probably helped give nationwide existing-home sales the small boost last month, the association suggested. Yun thought the small increase could be taken as a sign that the market might be stabilizing. That said, previous signs of stabilization earlier in the year have been dashed.
A credit crunch which took a turn for the worse in the summer has aggravated housing problems. It has made it more difficult for people to secure financing to buy a home.
The housing market has been suffering through a severe slump following five years of record-breaking activity from 2001 through 2005. Sales turned weak as did home prices. The boom-to-bust situation has increased dangers to the economy as a whole and has been especially hard on some homeowners.
Foreclosures have soared to record highs. A drop in home prices left some people stuck with balances on their home mortgages that eclipsed the worth of their home. Other home buyers were clobbered as low introductory rates on their mortgages jumped to much higher rates, which they couldn’t afford.
“A significant number of mortgages reset in early 2008 will likely increase delinquencies and foreclosures driving prices lower and pushing buyers away,” predicted Benjamin Reitzes, economic analyst at BMO Capital Markets Economics. “This could get even worse before it gets better.”
The housing and mortgage meltdowns have raised the odds that the country will fall into a recession. And, the situation has given Democrats and Republicans— including those who want to be the next president — plenty of opportunities to spread blame around.
The economy’s growth is expected to have slowed sharply to a pace of just 1.5 percent or less in the final three months of this year. The big worry is that housing and credit troubles will force individuals to cut back on spending and businesses to cut back on hiring and capital investment, throwing the economy into a tailspin.
To help bolster the economy, the Federal Reserve has sliced a key interest rate three times this year. Many economists are predicting the Fed will lower rates again when it meets in late January. Yun said he preferred to see the Fed make one big rate reduction at that time, rather than make a series of modest, quarter-point cuts.
On Friday, the government reported that new-home sales plunged by 9 percent in November to a pace of 647,000, the lowest in more than 12 years.
The new-home numbers are thought to give a more current account of the health of the housing market because they are recorded when a contract is signed. The existing home figures lag behind because they are based on contract closings, many of which reflect deals negotiated months earlier.