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Economy in Brief

U.S. Existing Home Sales in November Hit by New Regulations
by Sandy Batten  December 22, 2015

The National Association of Realtors reported that existing home sales slumped 10.5% in November to a seasonally adjusted annual sales pace of 4.76 million homes. This was the lowest level of sales since April 2014. All four major regions experienced a decline in sales in November. The October reading was revised down slightly to 5.32 million from the initially reported 5.36 million. Action Economics' Forecast Survey had indicated a 5.35 million sales pace for November.

New regulations likely played a major role in the November plunge, a point made by the NAR. In October, new regulations ("Know Before You Owe") were put in place by the Consumer Finance Protection Bureau. These new regulations appear to have lengthened the home mortgage closing process and thereby likely pushed some closings from November into December. Indeed, as the NAR chief economist noted, "signed contracts have remained steady in recent months." Indeed, pending homes sales (contracts recorded at the time of sale, which typically lead existing home sales (recorded at mortgage closing) by a month or two) did not point to the outsize November decline. Pending home sales in September slipped 1.6%m/m and rose 0.2%m/m in October.

The median sales price of an existing home was $220,300 in November, up 6.3% from November 2014 ($207,200). This was the 45th consecutive month in which the median sales price was higher than a year earlier.

In October, the composite index of housing affordability edged up 1.6% to 166.3. While this measure is well off its all-time high of 214.5 reached in January 2013, it remains well above the critical value of 100, indicating that the median income family can easily afford the median price existing home.

The inventory of unsold homes slipped to 2.04 million in November from 2.11 million in October. But with the sharp drop in the sales in November, the months' supply of existing homes on the market rose to 5.1 months from 4.8 months in October.

The data on existing home sales, prices and affordability can be found in Haver's USECON database. The regional price, affordability and inventory data are available in the REALTOR database. The expectations figure is from the Action Economics Forecast Survey, reported in the AS1REPNA database.

Existing Home Sales (SAAR, 000s) Nov Oct Sep NSA, Y/Y % 2014 2013 2012
Total 4,760 5,320 5,550 0.0 4,920 5,074 4,657
   Northeast 690 760 760 6.4 640 658 597
   Midwest 1,100 1,300 1,310 2.6 1,131 1,194 1,063
   South 1,980 2,110 2,210 -1.3 2,048 2,032 1,834
   West 990 1,150 1,270 -3.9 1,102 1,190 1,163
Single-Family Sales 4,150 4,720 4,930 -0.3 4,334 4,473 4,125
Median Price Total ($, NSA) 220,300 219,100 221,700 6.3 206,708 195,667 175,433
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