Auction.com has released its latest Auction.com Residential Real Estate Nowcast which projects that existing home sales for the month of December will fall between seasonally adjusted annual rates of 4.8 and 5.11 million annual sales, with a targeted number of 4.95 million – up 4.1 percent from a surprisingly lackluster November.
Last month, the National Association of Realtors® (NAR®) released its existing home sales data for November, reporting an 11.2 percent month-over-month decrease in home sales to 4.76 million units – even after its downward revision to 5.32 million units for October. This is the lowest level noted since April 2014 and represents a 3.8 percent year-over-year decline, the first annual decrease since September 2014. The drop-off was unexpected by both economist estimates and Auction.com, which predicted a more moderate decline for November and a range of 5.2 to 5.54 million units in its most recent nowcast.
Auction.com Chief Economist Peter Muoio cautioned against reading too much into November’s surprisingly weak sales figure, pointing to the presence of several positive underlying fundamentals that typically lead to home sales: a healthy job market, wage gains, improved consumer confidence and – at least through the end of 2015 – low interest rates.
According to Muoio, “One potential cause for the November drop-off is the introduction of the CFPB’s ‘Know Before You Owe’ mortgage initiative, which could have created processing delays and pushed closings out a month or two. If this is the case, we could end up seeing home sales bounce back from the November low by early 2016.”
While new regulations may have caused a temporary slowdown, low inventory and affordability concerns represent ongoing challenges that could further restrain home sales going into 2016. “Inventory of homes for sale continues to be extraordinarily low, since a very large number of homeowners are in negative or near-negative equity positions,” said Auction.com Executive Vice President Rick Sharga. “What could pose more of an issue in 2016 is the combination of potentially higher interest rates and rising home prices making homes less affordable for potential buyers.”
Home prices continue to inch up following four consecutive month-over-month declines from the summertime peak. NAR recently reported a 6.3 percent year-over-year increase in median existing home prices in November to $220,300 – well within the range of $214,057 – $236,589 that Auction.com predicted last month. Findings from the Auction.com Residential Real Estate Nowcast suggest that sales prices for existing homes will fall between $212,156 and $234,488 in the month of December with a targeted price of $223,322, representing a 7.3 percent year-over-year increase.