Home sales rise, but distressed properties hurt prices
December 21, 2011
Sales of existing homes rose in November, but distressed properties may be driving down prices. The National Association of Realtors reported a four percent bump in November sales, but the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey indicates 46.1 percent of the month's sales were for distressed properties.
Home sales hit highest level in 10 months
According to data released by NAR, it appears the housing market may finally be starting to rebound. Not only did sales of existing houses increase 4 percent in November, they are now at a 10 month high and up 34 percent from a year and a half ago. As of the end of November, 2.58 million existing homes remained on the market, representing a 7 month supply of properties.
The increase in home sales was most pronounced in the northeast where purchases for the month were up nearly 10 percent. Growth was slowest in southern states which saw only a 2.4 percent increase in sale transactions.
Last week, Freddie Mac announced the average interest rate for a 30-year fixed-rate mortgage had dropped to an all-time low of 3.94 percent. While the lower interest rates may encourage buyers, NAR notes many will continue to have difficulty qualifying for a home loan.
"With consumer price inflation rising by more than 3 percent this year, consumers are looking to lock-in steady payments by taking out long-term fixed-rate mortgages," said Moe Veissi, NAR President. "However, the problem remains that some financially qualified families who are willing to stay well within their means are being denied the opportunity to buy in today's market by the overly restrictive mortgage underwriting situation."
Median home prices drop across all regions
While more existing homes may be selling, average prices are dropping across the nation. NAR figures indicate homes in the west took the biggest hit with a median sale price 8.4 percent lower in November than the previous year. The northeast appeared relatively insulated from the dropping prices with the median sale price only 0.1 percent lower than last year.
For November, NAR calculated median sale prices to be at the following levels:
- Northeast: $240,200
- Midwest: $133,400
- South: $143,300
- West: $195,300
Data from the Campbell/Inside Mortgage Finance survey suggests distressed properties may be responsible in part for the declining prices. According to the November survey of 2,500 real estate agents nationwide, 46.1 percent of home sales last month were for distressed properties.
Sales of distressed properties were distributed among short sales and foreclosed (real estate-owned) properties:
- Short sales: 17.6 percent
- Move-in ready REO: 15.2 percent
- Damaged REO: 13.3 percent
The HousingPulse Survey also found REO properties spent about 9 to 10 weeks on the market before sale, the shortest time frame in 15 months. With mortgage rates remaining at historic lows, it seems likely the trend of consumers and investors snatching up bargain-basement properties will continue, leaving homeowners to hope that property values will rise once the supply of distressed properties is diminished.
