WASHINGTON — Sales of existing homes dropped 4.5% in November for the biggest decline since June, a real estate trade group said Monday, blaming the weakness on volatile interest rates and jitters caused by the stock market collapse.
The National Assn. of Realtors said existing, single-family homes were sold at a seasonally adjusted annual rate of 3.41 million units last month following increases of 3.5% in October and 1.2% in September.
The nationwide resale price for homes declined as well, falling $600 to a median price of $84,200 in November. That figure, the midpoint for all such sales, was still 4.7% higher than a year ago.
Analysts were disappointed by the November drop in sales, which was the largest since a 7.2% fall in June. Some predicted further declines in the months ahead, citing nervousness about the economy generated by the record plunge in stock prices and rising mortgage rates.
The housing industry is being closely watched following the stock market turmoil because many economists believe home sales closely reflect changes in consumer confidence. The government will report on November sales of new homes on Wednesday.
"This indicates home buyers may have become cautious, reflecting a reluctance to take on the commitment of a big mortgage," said David Wyss, an economist with Data Resources Inc., in Lexington, Mass.
The decline in existing home sales was particularly disappointing because many economists had been expecting that unusually warm weather in November and declining mortgage rates would boost resales during the month.
But others said the unusual volatility of mortgage rates through the fall has generated uncertainty among potential buyers.
"Today's report reflects a 'wait-and-see attitude' on the part of buyers in the wake of October's stock market crash and fluctuating mortgage interest rates," said Nestor R. Weigand Jr. of Wichita, Kan., president of the Realtors association.
Mortgage rates rose sharply just before the Oct. 19 stock market crash, only to decline in the following weeks as the Federal Reserve pumped money into the economy to cushion the shocks from the stock turmoil. But rates have started rising again in the past three weeks.
The Federal Home Loan Mortgage Corp. said 30-year, fixed-rate mortgages averaged 10.69% last week, up from 10.55% on Nov. 27. They had hit a high this year of 11.58% in mid-October.
Richard W. Rahn, chief economist for the U.S. Chamber of Commerce, said the resumption of rising mortgage rates was a dangerous signal and showed the Federal Reserve was pursuing "an overly tight monetary policy--one which has led to increased economic uncertainty and higher interest rates."
"These statistics are a further indication of the need to enlarge the money supply if we are to avoid a recession," Rahn said of the decline in housing sales.
John Tuccillo, chief economist of the Realtors association, said he expected further declines in home sales in the months ahead. He predicted that sales of existing homes would drop to 3.24 million units in 1988, down about 8% from the expected sales pace this year.
All regions of the country posted sales declines in November. Sales were down 6.3% in the West to a seasonally adjusted annual rate of 600,000 units. They fell 4.3% in the Northeast to an annual rate of 660,000 units and dropped 4.3% in the Midwest to an annual rate of 880,000.
Sales in the South fell 3.8% to an annual rate of 1.27 million units.
The median sales price of $84,200 in November compared to $84,800 for October and $80,400 in November, 1986.