Prices Down 0.8% from 2005 to 2006 in West

Realtors report drop in existing-home sales, prices
Median home price rides 4-month downtrend

David Lereah, National Association of Realtors

Existing-home sales and prices dropped in November compared to the same month last year, the National Association of Realtors reported today.

Nationally, the median price of existing homes dropped for the fourth consecutive month to $218,000, down 3.1 percent compared to November 2005. The average price of existing homes, at $266,000 in November, fell 1.8 percent compared to the same month last year.

The seasonally adjusted annual rate of existing-home sales dropped 10.7 percent in November compared to November 2005, to 6.28 million. However, home sales rose over October, possibly signalling a bottom in the housing market. It was the second month in a row of increases in the sales rate after six consecutive months of decline earlier in the year.

The rate is a projection of a monthly sales total over a 12-month period, adjusted for seasonal fluctuations in sales activity. The sales statistics include single-family homes, town homes, condominiums and co-ops.

David Lereah, NAR's chief economist, said in a statement, "Existing-home sales should be rising gradually during 2007 -- it looks like we may have reached the low point for the current cycle in September. 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."

He added, "For every 1 percent drop in home prices, we project an additional 50,000 buyers are drawn into the market."

[Note: I expect that home prices in our area will drop slightly less than 1% per month locally until April, when we will see a flattening of prices for much of the remainder of the year.]

Total housing inventory levels fell 1 percent at the end of November [Also noted in the local market] to 3.82 million existing homes available for sale, which represents a 7.3-month supply at the current sales pace. The unsold inventory index is somewhat higher locally. A for-sale supply of greater than six months is generally considered to be a buyer's market.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.24 percent in November, down from 6.36 percent in October. The rate was 6.33 percent in November 2005.

NAR President Pat Vredevoogd Combs said in a statement, "Mortgage interest rates are the lowest they've been since January, and it's the first time since August of 2005 that interest rates are lower than a year earlier. Combined with a plentiful supply of homes on the market, there's a window for buyers now with conditions that we haven't seen prior to the beginning of the housing boom in 2001."

[While interest rates remain historically low, you have to love the NAR positive spin on the housing market.]

Single-family home sales increased 0.2 percent to a seasonally adjusted annual rate of 5.52 million in November from a pace of 5.51 million in October, but were 10.2 percent lower than the 6.15 million-unit level in November 2005. The median existing single-family home price was $217,200 in November, which is 3.6 percent lower than a year ago, the Realtor group reported.

Existing condominium and cooperative housing sales rose 3.1 percent to a seasonally adjusted annual rate of 757,000 units in November from a downwardly revised 734,000 in October, but were 13.6 percent below the 876,000-unit pace in November 2005, according to the report. The median existing condo price was $224,600 in November, which is unchanged from a year ago.

Regionally, existing-home sales in the Northeast increased 6 percent in November and were 4.5 percent below November 2005. The median existing-home price in the Northeast was $269,000, down 2.2 percent from a year earlier.

Existing-home sales in the West rose 0.8 percent to an annual pace of 1.32 million in November and were 17.5 percent lower than a year earlier. The median price in the West was $351,000, down 0.8 percent from November 2005.

Existing-home sales in the Midwest were unchanged in November and were 9.6 percent below sales in November 2005. The median price in the Midwest was $165,000, which is 3.5 percent below a year ago, according to the report.

Existing-home sales in the South fell 1.6 percent in November and were 10.2 percent below a year ago. The median price in the South was $179,000, down 3.2 percent from November 2005.

Existing-home sales statistics are based on transaction closings, the association noted, and the sales data is based on about 40 percent of multiple listing service data each month.
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Summary: Not a great housing market... not a horrible housing market. The Notice of Default rate is up, but still below the historic mean for our area.

Advice to buyers: incorporate an aggressive stand on purchase price, and pick off a weak seller, as long as your buying criteria is fairly broad. If only one home on the market meets all of your criteria, you may not get a steal of a deal but you can get the home of your dreams with still-favorable interest rates.

Advice to sellers: get your head out of the [sand]. If you are pricing high compared to the competition, don't expect to sell. You need to be priced at the bottom of the competition, and work with whatever buyer makes an offer. The market is declining... don't follow it down with incremental price cuts yet just uncompetitive enough not to generate offers to purchase. It is a losing strategy. Of course if you really don't have to sell, pull your home off the market. After all, if you think it is worth more than the buyers do today, congratulations, you just bought your house back. While you are at it, add another zero at the end of whatever you think it is worth. Why not? You may be living in it for a while!

Harsh words? No. It's reality-based real estate.