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NEW YORK (CNNMoney.com) -- After surging 10% in October, sales of existing homes jumped again in November, growing 7.4% compared with October to an annualized rate of 6.54 million units, according to the National Association of Realtors.
"This clearly is a rush of first-time buyers not wanting to miss out on the tax credit," said NAR's chief economist, Lawrence Yun.
November was originally going to be the last month in which sales to first-time homebuyers would qualify for a federal tax credit of up to $8,000. However, that deadline was extended through June.
In addition, the tax credit was expanded to cover people who already own a home. They can qualify for a $6,500 tax credit if purchase a new house before the end of June. That should encourage "trade-up" buyers.
The strength of sales in November surprised the industry. A panel of experts compiled by Briefing.com had forecast month-over-month sales growth of just 2.5% to 6.25 million from 6.1 million a month earlier.
The sales total was also a huge improvement over a year ago. Sales rose 45.7% over the paltry annualized rate of 4.49 million units during November 2008.
The contribution made by first-time buyers is evident in a separate survey NAR conducted of its members. They estimate that 51% of sales in November were by newcomers to the market, up a point from 50% in October. Normally, first timers account for about 40% of sales.
Also propelling sales higher were rock-bottom interest rates. The average for a 30-year, fixed-rate loan during the month was just 4.88%, down from 4.95% in October and 6.09% a year ago.
With rates that much lower, homebuyers can save more than $150 a month on a $200,000 mortgage.
The industry expects home sales to slacken December, partially because of the tax credit's originally scheduled demise. That caused some buyers to push up their closing, stealing sales from December.
However, sales will not fall off a cliff, though, according to Walter Molony, a NAR spokesman. "The psychology seems to be turning around," he said. "Potential buyers, who had been staying on the fence, now believe we're at or near the market bottom."
One X-factor, however, is the vast numbers of homes that may come to market over the next few months. There is a large "shadow inventory" -- homes owned by banks and mortgage companies -- that have not yet been put up for sale. It could be as many as 1.7 million units, according to First American CoreLogic.
In addition, another spate of foreclosures could be hitting the market as a number of option-ARM mortgages are set to default.
All that may drive prices down, according to Shari Olefson, author of "Foreclosure Nation: Mortgaging the American Dream." And the impact of these renewed price declines could again alter the market psychology.
"People think that prices have bottomed," she said. "I don't think they have. People will see price declines and that will discourage them from buying."
Mike Larson, a real estate analyst with Weiss Research has preached all through the bust that price declines are what will "fix" the housing crisis.
"We needed to see prices fall to make ownership competitive with renting again, and to restore the normal relationship of house prices to income," he said. "That has now happened and you're seeing buyers come out of the woodwork as a result."
Still, they will have to come out in large numbers to offset the inventory overhang in some of the worst markets, according to Olefson. In the Florida condo market, for example, there is a 35-to-40 month supply of units at the current rates of sale, she said.
Prices still almost certainly have further to fall.
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The Census Bureau reported Thursday that builders broke ground for 598,000 new homes during August, up 1.5% from a revised 589,000 in July. That was considerably higher than industry experts were predicting: The consensus analyst forecast compiled by Briefing.com was for 583,000 new starts.
Building permits rose 2.7% to 579,000 from a revised 564,000 in July.
On Wednesday, the National Association of Home Builders reported their index of homebuilder confidence had risen a point to 19, its highest level since May 2008.
Helping to boost demand for new homes has been the first-time homebuyer tax credit, which has enabled many builders to reduce their inventories of unsold homes.
"Many builders have not only reduced excess inventory, but now are actually reporting such low inventory that they need to start more homes to replace those they've just sold," said Brad Hunter, chief economist for Metrostudy, a real estate analytics firm.
Both starts and permits are still well off from their levels of a year ago. The number of starts is down 29.6% from 849,000 last August, and permits dropped 32.4% from 857,000 last year.
The housing starts report was the latest in a series of releases that indicate that the market may have bottomed. These include improvement in new home sales, existing home sales and housing prices.
Sales of previously owned single-family homes were up 7.2% compared with June and 5% from July 2008, The National Association of Realtors (NAR) reported Friday. The monthly gain was the largest on record for existing-home sales, which NAR has tracked since 1999."The housing market has decisively turned for the better," said Lawrence Yun, NAR's chief economist. "A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales."
July home sales hit an annualized rate of 5.24 million proprieties, marking the first breach of the 5 million annualized rate mark since last September, when they hit 5.1 million. Since then, they have stayed in a very narrow range, bouncing between between January's low of 4.49 million and October's high of 4.94 million.The July performance far exceeded expectations: A consensus of real estate experts had forecast sales of 5 million.
Of course, homes should be selling. Prices have fallen more than 32% from their peaks, set in the summer of 2006. Plus, mortgage rates near historic lows makes the cost of purchasing a home lower than they've been in nearly 20 years. "In some recovering markets like San Diego, Las Vegas, Phoenix and Orlando, the demand for foreclosed and lower priced homes has spiked, and a lack of inventory is becoming a common complaint," Yun said.
Overall though, the national inventory rose by more than 7% to 4.09 million units. That will continue to keep prices low, according to Mike Larson, a housing analyst with Weiss Research. "There's a bifurcation of the market," he said. "There's excess supply putting downward pressure on prices and people respond to the lower prices by buying homes."
Housing is its most affordable in many years, he pointed out. "Falling prices is not part of the problem, they're part of the solution," he said. Hurting home sales have been stubborn increases in job losses. More than 6.7 million jobs have been lost since the beginning of 2008.
That's one reason why Robert Dye, a senior economist for PNC Financial Services (PNC, Fortune 500), is keeping his optimism in check. "I wouldn't go overboard on this number," he said. "The economy is still healing and will continue to run into some bumps. But it does bode very well for the future and shows buyer confidence is increasing."
There is one potential bump, however: The looming end of the first-time homebuyers credit. The credit gave first-time homebuyers an up to $8,000 refund on their taxes if they close on a deal before Dec. 1. That credit has been motivating buyers, and when it expires, demand could dry up."Just like with the cash-for-clunkers program, we run the risk of a letdown as the program runs its course," Dye said.
Regionally, the strongest market was the Northeast, where sales soared by 13.4% to an annualized rate of 930,000. That was 3.3% higher than last July. The median price of homes sold during the month was $236,700, off 15% from last year. Midwest sales rose 10.9% to a 1.22 million rate, 8% higher year-over-year. Prices there have sunk 5.9% over the past 12 months to a median of $157,200.
In the South, sales were up 7.1% from June and 5.4% from last July to a rate of 1.95 million. Price have dropped 7.1% to $164,500 over the past 12 months. The only region reporting a slip in sales was the West, where they fell 1.7% to a rate of 1.13 million. That was ahead of last July, however, by 1.8%. The median price there was $202,300, a whopping 28% below what is was a year ago.
The American Recovery and Reinvestment Act of 2009 offers an $8,000 tax credit for first-time buyers who purchase a home on or after Jan. 1, 2009, and before Dec. 1, 2009. Unlike previous tax credits for first-time buyers, this one doesn’t have to be repaid.
Details of the tax credit include:
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WASHINGTON D.C., June 8, 2009 -- Contempo Realty, Inc. has been selected for the 2009 Best of Coral Gables Award in the Real Estate Agents category by the U.S. Commerce Association (USCA).
The USCA "Best of Local Business" Award Program recognizes outstanding local businesses throughout the country. Each year, the USCA identifies companies that they believe have achieved exceptional marketing success in their local community and business category. These are local companies that enhance the positive image of small business through service to their customers and community.
Various sources of information were gathered and analyzed to choose the winners in each category. The 2009 USCA Award Program focused on quality, not quantity. Winners are determined based on the information gathered both internally by the USCA and data provided by third parties.
About U.S. Commerce Association (USCA)
U.S. Commerce Association (USCA) is a Washington D.C. based organization funded by local businesses operating in towns, large and small, across America. The purpose of USCA is to promote local business through public relations, marketing and advertising.
The USCA was established to recognize the best of local businesses in their community. Our organization works exclusively with local business owners, trade groups, professional associations, chambers of commerce and other business advertising and marketing groups. Our mission is to be an advocate for small and medium size businesses and business entrepreneurs across America.
NEW YORK (Reuters) -- Mortgage applications fell for the first time in four weeks, driven by a drop in demand for home refinancing loans as interest rates climbed, data from an industry group showed on Wednesday.
Applications for loans to buy a home, an early indicator of sales, were flat. Lack of interest for purchase loans does not bode well for the hard-hit U.S. housing market, which has otherwise been showing signs of stabilization.
The U.S. Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended July 24 decreased 6.3% to 495.4.
Jeffrey Fisher, professor of real estate and director of the Benecki Center for Real Estate Studies at the Indiana University Kelley School of Business, said the housing market has stabilized, but believes interest rates on mortgages are very important right now and are likely to rise.
"The rise in interest rates on mortgages is likely going to be accompanied by a rise in inflation and that has historically been good for housing," he said.
Construction costs are also likely to start rising again if the market in China continues to recover and their demand for materials increases, he said.
"This will put upward pressure on home prices," he said.
By Les Christie, CNNMoney.com staff writer
Last Updated: July 23, 2009: 12:02 PM ET
NEW YORK (CNNMoney.com) -- Sales of existing homes disappointed again in June, coming in at a seasonally adjusted annualized rate of 4.89 million, up just 3.6% compared with May, according to a monthly report from the National Association of Realtors.
Home sales peaked in August 2005 at an annualized rate of more than 7.2 million, but sales have not surpassed the 5 million mark since last September, despite a large number of homes on the market, low mortgage rates, a tax credit for first-time homebuyers and low, low prices.
The median price for a home sold during the month was just $181,800 -- 15.4% lower than 12 months earlier. Sales were down, oh so slightly, from 12 months ago, from 4.90 million in June 2008. Mortgage rates back then were about 6.3% for a 30-year, fixed-rate mortgage loan. They stood at 5.42% last month, which was still a step up from the 4.86% rates available in May.
The sales figures were slightly higher than industry expectations. A panel of analyst forecasts compiled by Briefing.com had predicted that sales would come in at 4.84 million units.
NAR chief economist Lawrence Yun expressed hope that the industry could build upon the modest gain. "We expect a gradual uptrend in sales to continue due to tax credit incentives and historically high affordability conditions," he said.
There was some reason for optimism, according to Stuart Hoffman, chief economist for PNC Financial Services (PNC, Fortune 500) in Pittsburgh. Three months of gains in a row indicates to him that, "The downturn is probably behind us. There should be a period of [market] stabilization and a creeping up of sales."
One possible problem, however, is that affordability may not continue to improve as fast as it has. Price declines are flattening out and mortgage rates are less favorable than they were.
"Mortgage rates were much lower in April and May, when many of the deals [reflected in this report] were negotiated," said Hoffman. That could mean disappointing results during the next few months as higher rates tamp down momentum.
"It's still not great, but we're no longer poised for Armageddon," said Mike Larson, a housing analyst for Weiss Research, in a prepared statement. "We're seeing sales rates steadily and gradually climb at the same time the supply of homes for sale is falling, We're also seeing the pace of home price declines ease up. None of this is great news. But it's a noticeable -- and welcome -- change from the free-fall we witnessed in 2007 and 2008."
Drag on the market
The main culprit for the tepid report was the economy. Job losses have taken many potential homebuyers out of the market entirely and discouraged others from buying.
"Affordability improvement brought out some homebuyers," said Hoffman, "but sales are still pretty flat. A more favorable job picture and we wouldn't be swimming so hard against the tide."
Another problem, according to Yun, is that home sales are being lost as a result of new appraisal standards that recently went into effect. Too many inexperienced appraisers are using poor comparisons when evaluating homes, which can sabotage deals.
The NAR release reported that a June survey of its members found that 37% said they lost a sale as a result of appraisal problems, with seven out of 10 reporting an increased use of out-of-area appraisers.
"In many cases," Yun said, "normal homes are being compared with distressed homes sold at a discount, which often are in subpar condition. This is causing real harm to both buyers and sellers."
Larson, however, downplays this problem. "Clearly tighter appraisal standards will limit some sales, but to suggest the appraisals are not being realistic because they used distressed properties is not right. Distressed sales are a large part of the market."
First Published: July 23, 2009: 10:12 AM ET
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