Sales of previously owned homes soared 7.4% in the traditionally slow month of November as buyers looked to take advantage of a tax credit for first-time purchases, an industry group said this morning.
Sales of single-family houses, town homes, condominiums and co-ops rose to a seasonally adjusted annual rate of 6.54 million units in November, the National Assn. of Realtors in Washington said.
That is 44.1% above the 4.54 million sales pace of November 2008.
The 7.4% rise reported today was compared with sales in October 2009.
The median price for all types of existing homes was $172,600 in November, a 4.3% drop from November 2008. Distressed properties accounted for 33% of sales in November, the Realtors group said.
The Realtors group lobbied heavily for the extension and expansion of the $8,000 federal tax credit for first-time buyers initially scheduled to expire Nov. 30. Congress last month extended the subsidy through April and expanded it to include a $6,500 incentive for some buyers who already own a home.
Lawrence Yun, chief economist for the Realtors group, said the bump came as first-time buyers -- unsure whether Congress would extend the tax credit program in early November -- rushed to take advantage of the credit. A survey of buyers in November by the Realtors group showed first-time purchasers made up 51% of all transactions.
"We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit," Yun said.
The only markets with lower sales were in San Diego, Riverside and Sacramento, where inventory shortages for lower-priced homes are limiting sales, the Realtors group said.
In the West, sales of previously owned homes increased 10.6% to a seasonally adjusted annual rate of 1.46 million units. That's an increase of 28.1% from November 2008. The median price for a home in the West was $231,100, which is 4.1% below a year ago.
Patrick Newport, U.S. economist for IHS Global Insight, said in a note to clients this morning that the effect of the first tax credit was to borrow sales from 2010 in 2009. The effect of the second credit will likely be to shift sales from the second half of 2010 into the first.
"We project that sales will drop in the first quarter of 2010, payback from the first tax credit," he wrote. "Sales will take a second hit in the third quarter of 2010, payback from the second tax credit. Overall, sales in 2010 will be about the same as in 2009."
Total housing inventory at the end of November declined 1.3% to 3.52 million previously owned homes available for sale, representing a six-and-a-half month supply at the current pace and down from a seven-month supply in October.
The last time there was a lower supply of homes on the market was April 2006 when it was at a 6.1-month supply, the Realtors group said.
But one major issue of concern among experts has been a potential wave of foreclosures hitting the market next year and flooding it, putting pressure on prices. A supply of 1.7 million of such homes headed for sale because of foreclosure or delinquency existed at the end of the third quarter, the research firm First American CoreLogic reported last week. Some economists believe that this glut of properties could slow the recovery, while others argue that lenders will put the homes up for sale at a careful pace.