Existing home sales edge up in November as prices fall

Thursday, December 28th, 2006

USA Today

WASHINGTON (AP) — Sales of existing homes managed to eke out a small increase in November, but the price of homes sold fell for a record fourth consecutive month, a real estate trade group reported Thursday.

The National Association of Realtors reported that sales of previously owned homes rose 0.6% in November to a seasonally adjusted annual rate of 6.28 million units. That followed a 0.5% sales increase in October and marked the first back-to-back sales gains since the spring of 2005.

The slight increases in sales were not enough to halt a slide in home prices. The median price for an existing home sold in November dropped to $218,000, down 3.1% from the price a year ago. It was the first time on record that sales prices compared to a year ago have fallen for four straight months.

The report on existing home sales offered further hope that the serious slump in housing may be bottoming out.

It followed a report Wednesday that showed that new-home sales rose 3.4% in November, the third gain in the past four months.

David Lereah, chief economist for the Realtors, said he believes that September’s sales activity may represent the low point for sales this cycle, but he cautioned that home prices would probably continue declining for a few more months.

By region of the country, sales were down 1.6% in the South and they were unchanged in the Midwest. However, the Northeast posted a strong 6% sales gain and the West saw sales rise 0.8%.

The housing industry has been in a severe slump this year after posting five consecutive years of record sales of both new and existing homes.

Lereah said he believes sales of existing homes would fall 9% this year and post a drop of 1% in 2007 as the markets undergo a correction following what many economists believe was a real estate speculative bubble.

“We’ve entered a more sustainable period of home sales now and we expect greater support for prices over time as inventory levels are eventually drawn down,” Lereah said.

The inventory of homes for sale was down 1% at the end of November to 3.82 million units.

He predicted price declines would continue in December and probably for the early part of 2007. He said these were necessary adjustments that were luring buyers back into the market.

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