Now that we’ve crossed over the threshold of 2016, optimism reins – even with NAR’s (National Association of Realtors®) latest sales figures. According to NAR, sales of pre-owned homes dipped lower than expected and prior month’s readings according to the National Association of Realtors® (NAR). Experts in the Real Estate industry had expected existing home sales to slow down to a seasonally-adjusted annual rate of 5.30 million sales, based on October’s reading of 5.32 million sales. Instead, However, November’s reading dropped to 4.76 million sales. November’s drop represented a decline of 10.50% decrease in existing home sales month-to-month – along with home sales that were 3.80% lower year-over-year.
November national home sales represented the first time in over a year that the year-over-year reading for sales of pre-owned homes was lower than for the previous month. Experts see such a steep drop in sales as unusual except in cases where housing tax credits expire causing home sales to drop after a last minute increase in home purchases by home buyers rushing to gain a tax credit advantage.
Tight Supply of Homes, Pressure on Rising Prices and New Regulations Maybe Key Reasons for Lower Sales
A lower supply of available homes, especially in Long Beach, coupled with an increased demand for homes over the past year is usually the main reason to cause prices to rise and sales to fall. A natural progression which leads to decreased affordability. This is seen very clearly in the “First Time Home Buyer” numbers. First-time buyers accounted normally account for 40% of all purchases. This past November however, these buyers only accounted for 30%. In addition, the national average home price rose to $220,300, increasing over 6% year-over-year. This indicates that home prices are rising faster than wages, putting a huge crimp in the plans of would-be home buyers that are on the fence financially.
Supply of Homes National Hover Just Below Normal. In Long Beach However, the Supply is Extremely Tight
With a 5.1-month supply of existing homes for sale in November, Lawrence Yun, NAR’s chief economist, said that new regulations, particularly the Truth in Lending Act (TILA) has increased the closing period for many home sales may have pushed more sales into December that otherwise would have closed in November. Yun is quick to point out the normal industry standard is 6-month supply of homes. Certainly here in Southern California and in particular, Long Beach, we have seen a real tightening of inventory. Our November numbers indicate a 1.9 month inventory of Single Family Homes, with a mere 2 month supply for Townhomes/Condos. (NOTE: Latest indicators in the early part of December indicate that the supply of inventory in Long Beach has gone even lower to 1.6 months)
Distressed and REO Homes
Distressed property sales involving bank-owned homes and short sales increased in November, but this was due to financial institutions offering more homes for sale than in previous months. Analysts said that the increase in distressed sales did not represent an increase in mortgage default and foreclosure rates.
There is a Silver Lining to this Picture
While November National Home Sales indicate a dip in sales, NAR forecasts that existing home sales will reach 5.20 million during 2016; this represents an increase of 2.90 percent.
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