Existing-Home Sales Up 0.6% In November, but Prices Fell

A for sale sign sits in front of a home on a quiet street in Walpole, Mass., Thursday, Dec. 28, 2006. 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, The National Association of Realtors reported Thursday. (AP Photo/Steven Senne) (Steven Senne - AP)

Sales of existing homes inched up in November but prices continued to erode, suggesting that the housing market may be stabilizing for now, but not rebounding anytime soon.

The National Association of Realtors reported yesterday that sales of previously owned homes were up 0.6 percent from October but down 10.7 percent from November 2005. The October and November figures show the first back-to-back sales gains since spring 2005, when the market began to soften.

But the median price for existing homes dropped to $218,000 in November, down 3.1 percent from November 2005, when it was $225,000. Median sales prices have fallen four months in a row, the longest stretch ever when comparing year-to-year figures.

"The first signs of a recovery are at hand," said Mark Zandi, chief economist at Moody's Economy.com. "But we're at the beginning of what will be a very long end to the housing correction. We'll probably see further declines in housing prices throughout most of 2007."

On Wednesday, the government reported an unexpected 3.4 percent increase in new-home sales in November. Some analysts attributed the bounce in home sales to a three-quarter-percentage-point decline in mortgage interest rates since June.

Several economists said the large supply of homes available was the main reason for lower existing-home prices.

The inventory of houses for sale fell 1 percent in November. But 3.82 million previously owned homes remained for sale at the end of the month. If no more homes were added to the inventory, it would take 7.3 months sell all of them at the current rate, the Realtors association reported.

"Pricing will stabilize when and only when inventories really start to come down," said L. Todd Vencil, an analyst at BB&T Capital Markets. "That's the way buyer and seller psychology works. If inventory is not moving, sellers cut their prices to sell their homes and buyers feel more confident driving a harder bargain."

To work through the supply, sellers must offer more incentives and concessions, said Michael Larson, a real estate analyst for Weiss Research. Even though the supply of homes is down 1.1 percent from the July peak, it is more than double what it was in early 2001, before the five-year real estate boom.

"Because of the sheer magnitude of the supply overhang, we're going to have to see the sellers be more reasonable on prices," Larson said. "The residential real estate boom of recent years has been a march straight up and homes are still relatively unaffordable for the average buyer."

David A. Lereah, chief economist for the Realtors association, downplayed the excess inventory, arguing that the 7.3 months of supply is close to the normal supply of 5.5 to 6.5 months.

The current supply of existing homes is far below the 12-month high of the 1980 real estate recession and the 9.4-month high of the 1990-91 recession, Lereah said.

"We're not too far from the normal conditions," Lereah said. "We just need a little nudge to get there."

In Lereah's opinion, the market hit its low point in September and has already shown signs of recovery.

It's still too early to predict a turn in the market, said Gregory E. Gieber, senior analyst at A.G. Edwards. "To say this industry has definitively improved, you've got to see a good spring in single-family home sales . . . for a couple of months in a row. The numbers today are neither a plus nor a minus."

Yesterday's report showed some regional differences in sales patterns.

In the South, which includes the Washington area, existing-home sales fell 1.6 percent in November from the previous month and 10.2 percent from a year earlier. The median price in the South was down 3.2 percent, to $179,000, from a year earlier.

Sales in the Northeast were up 6 percent in November from the previous month and down 4.5 percent from the November 2005. The median price was $269,000, down 2.2 percent from a year earlier.