Housing market perks up as economy strengthens
Wednesday, December 22, 2010; 8:18 PM
The housing market is showing surprising signs of improvement in recent months, as the broader economy strengthens slightly heading into 2011.
Sales of previously owned homes climbed 5.6 percent in November, the National Association of Realtors said Wednesday, with gains reported in every region of the country, although home-buying activity remained well below healthy levels.
The median price of existing homes sold in November was $170,600, up 0.4 percent from a year earlier, the association said.
Also Wednesday, the Commerce Department revised upward its estimate of overall economic growth from July through September, saying that gross domestic product rose at a 2.6 percent annual rate, not the 2.5 percent earlier estimated.
Most economic data in recent weeks, including Wednesday's releases, have suggested that the pace of growth is picking up a bit at year's end, with many forecasters now expecting fourth-quarter GDP growth to be in the 3 to 3.5 percent range. Most reports on holiday sales have shown solid improvement, for example. Moreover, many analysts expect a boost to growth from the tax deal President Obama signed last week, which will temporarily reduce payroll taxes starting next month.
Although the economy showed weak growth through the summer and early fall, the pace seems to be quickening, which should help bring down the 9.8 percent unemployment rate over time.
The housing market might be poised to be at least a mild positive in the economy in 2011, though mainly because home construction and sales are already so low.
"The level of activity will still be low relative to the boom," said Diane Swonk, chief economist at Mesirow Financial. "But the trend is starting to move in the right direction, which is a little bit of good news with which to close out the year."
Lawrence Yun, chief economist at the National Association of Realtors, said he expects 4.8 million existing homes to be sold by year's end, far short of the 5.2 million level that he would characterize as normal. "We still have some ways to go," Yun said.
The housing market has been clobbered by a stubbornly high unemployment rate and a glut of aggressively priced foreclosures that are dragging down home prices. If these conditions improve as some expect next year, the housing market should stabilize.
But experts who track the market are split about when that rebound will occur, according to a survey released Wednesday by MacroMarkets. More than half of the 110 economists and real estate experts polled by the group said they do not expect the market to recover until 2012.
The supply of existing homes for sale fell 4 percent to 3.71 million in November. If sales continue at the November pace, it would take 9.5 months to sell them all, down from 10.5 months in October.
The Realtors group attributed the drop in inventory to a normal seasonal decline that occurs during the winter months, when buyers generally retreat and sellers keep their homes off the market.
Distressed properties, including foreclosures, made up about one-third of existing home sales in November, roughly in line with the previous month and the previous year.
The problem with foreclosure paperwork errors that prompted several large lenders to halt evictions "has not affected sales all that much," Patrick Newport, an economist at IHS Global Insight, wrote in a note to clients.