Longer Closing Times Hamper Home Sales
December 23, 2015
Nationwide existing-home sales dipped significantly in November, reaching their slowest pace in more than one-and-a-half years, according to the National Association of REALTORS®’ latest housing report. All four regions posted sales declines.
Existing-home sales – completed transactions for single-family homes, townhomes, condos, and co-ops – dropped 10.5 percent to a seasonally adjusted annual rate of 4.76 million in November, according to NAR’s report. It was the largest decline since July 2010. Sales for the period are 3.8 percent below year-ago levels.
Lawrence Yun, NAR’s chief economist, says multiple factors were at play for November’s big sales decline. He says one reason could be the industry’s adjustment to the new Know Before You Owe rule, causing longer closing times. NAR’s REALTOR® Confidence Index showed that 47 percent of real estate professionals reported in November that they were seeing longer closing times from a year ago, up from 37 percent in October. The new rules took effect Oct. 3.
“It’s possible the longer time frames pushed a latter portion of would-be November transactions into December,” says Yun. “As long as closing time frames don’t rise even further, it’s likely more sales will register to this month’s total, and November’s large dip will be more of an outlier.”
REALTORS® have worked hard to prepare for the Know Before You Owe rule, and “we knew there would be some near-term challenges as the industry continues to adapt,” says NAR President Tom Salomone. “Nonetheless, an early trend of longer lead times to closings is cause for concern. As REALTORS® reports issues with their transactions, we will continue to work with the Consumer Financial Protection Bureau to ensure as little disruption as possible to the business of real estate.”
Yun noted another hamper to home sales last month was likely sparse inventory and affordability issues that continue to impede a large pool of buyers’ ability to buy.
“However, signed contracts have remained mostly steady in recent months, and properties sold faster in November,” Yun says. “Therefore it’s highly possible the stark sales decline wasn’t because of sudden, withering demand.”
4 Key Housing Stats From November’s Report
1. Inventory: Total housing inventory at the end of the month fell 3.3 percent to 2.04 million existing homes available for sale. Inventory levels are now 1.9 percent lower than a year ago (2.08 million). At the current sales pace, unsold inventory is at a 5.1-month supply, up from 4.8 months in October.
2. Home prices: The median existing-home price for all housing types in November was $220,300 -- 6.3 percent higher than a year ago ($207,200). This marks the 45th consecutive month of year-over-year gains.
3. Days on the market: Thirty-seven percent of homes sold in November were on the market for less than a month. Properties stayed on the market for a median of 54 days in November – a drop from 57 days in October and from 65 days in November 2014. Short sales were on the market the longest at a median of 91 days last month, while foreclosures sold in 47 days and non-distressed homes took 54 days.
4. Distressed sales: Foreclosures and short sales rose to 9 percent in November, up from 6 percent in October but unchanged from a year ago. Foreclosures made up 7 percent of November sales while short sales comprised 2 percent. Foreclosures sold for a discount, on average, of 15 percent below market value while short sales were discounted an average of 15 percent.
Sales Numbers By Region
Here’s a closer look at how existing-home sales performed across the country in November:
- Northeast: Existing-home sales fell 9.2 percent to an annual rate of 690,000, but remain 1.5 percent above a year ago. Median price: $254,800, 3.2 percent above November 2014.
- Midwest: Existing-home sales dropped 15.4 percent to an annual rate of 1.10 million in November, and are 2.7 percent below year ago levels. Median price: $169,300, up 5.3 percent from a year ago.
- South: Existing-home sales dropped 6.2 percent to an annual rate of 1.98 million in November, and are 5.7 percent below a year ago. Median price: $189,400, up 6.3 percent from a year ago.
- West: Existing-home sales fell 13.9 percent to an annual rate of 990,000 in November, and are 4.8 percent lower than a year ago. Median price: $319,700, 8.3 percent above November 2014.
Updated: October 15, 2019