(Bloomberg) — Sales of previously owned homes slumped inNovember to the lowest level since April of last year as a changein industry rules lengthened the amount of time it took buyers toclose on a deal.

|

Closings on existing homes, which usually take place a month ortwo after a contract is signed, declined 10.5% to a 4.76 millionannual rate after a revised 5.32 million pace in October, theNational Association of Realtors said Tuesday. November sales wereweaker than the most pessimistic forecast in a Bloombergsurvey.

|

“November home sales without a doubt were heavily impacted by anew federal government rule regarding closing documents,” LawrenceYun, NAR chief economist, said in a news conference as the figureswere released, adding that sales may rebound this month. “Buyinginterest is there, it’s just that closings are not happening on atimely basis.”

|

Housing has helped prop up growth this year, thanks to cheapborrowing costs and a labor market that’s given Americans greaterjob security. Faster wage growth would help provide the next leg ofsupport for residential real estate, especially by assistingfirst-time buyers who have found it difficult to save enough for adown payment.

|

Strong fundamentals

|

“When you see a decline of this magnitude and you can’t pinpointthe fundamentals, the culprit is primarily likely going to be thisnew regulation,’’ said Ryan Sweet, a senior economist at Moody’sAnalytics Inc. in West Chester, Pennsylvania. “The underlying trendis improving. The tightening job market, modest acceleration inwage gains and very low interest rates are all positives for thehousing market.”

|

The Bloomberg survey median called for 5.35 million homes soldat an annual rate last month. Estimates for the pace of 76economists ranged from 4.95 million to 5.5 million. October’s ratewas revised from a previously reported 5.36 million. The 10.5% dropwas the biggest since July 2010.

|

The length of time it took buyers to close on a home purchasewas 41 days in November, up from 36 days a year earlier. Yunattributes that to a change in regulation that consolidated theclosing process and the introduction of new forms that areprocessed by lenders and title companies.

|

“As long as closing time frames don’t rise even further, it’slikely more sales will register to this month’s total,” Yunsaid.

|

Compared with a year earlier, purchases decreased 3.8% inNovember on a seasonally adjusted basis. Unadjusted, sales wereunchanged.

|

Purchases of existing homes decreased in all of four regions inNovember from month earlier, led by a 15.4% plunge in theMidwest.

|

The number of existing properties on the market fell 3.3% to2.04 million in November, the fewest since March, from a monthearlier. At the current pace, it would take 5.1 months to sellthose houses compared with 4.8 months at the end of October. Theinventory of unsold homes was down from 2.08 million a yearearlier.

|

The median time a home was on the market decreased last month to54 days from 57 days in October.

|

In general, tight inventory levels have helped boost the valuesof homes on the market. The median price of an existing home rose6.3% to $220,300 from November 2014.

|

First-time buyers

|

Higher prices are leaving home purchases further out of reachfor some first-time buyers. They accounted for 30% of allpurchases, the report showed, compared to the 40% that isconsidered more typical.

|

“I’m concerned with prices rising much faster than people’sincome,” Yun said.

|

U.S. home prices in October surpassed their 2007 peak, a FederalHousing Finance Agency index showed Tuesday. Prices increased 0.5%on a seasonally adjusted basis from September. The FHFA’s monthlyindex is now 0.3% higher than the level reached in March 2007.

|

The housing market has posted steady if gradual progress overthe course of the recovery, supported by accommodative FederalReserve policy that has enabled low borrowing costs. Residentialinvestment expanded at an 8.2% annualized rate in the thirdquarter, helping the economy grow 2%, according to figures releasedTuesday from the Commerce Department.

|

Now that the central bank has increased its benchmark interestrate for the first time since 2006, mortgage costs may head highernext year. Still, any advance is likely to be slow, as Fedofficials have said that the economy will warrant tightening policyonly gradually.

|

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.

Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader

  • All PropertyCasualty360.com news coverage, best practices, and in-depth analysis.
  • Educational webcasts, resources from industry leaders, and informative newsletters.
  • Other award-winning websites including BenefitsPRO.com and ThinkAdvisor.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.