Existing-home sales continued on an uptrend in December, rising for three consecutive months and remaining above a year ago, according to the National Association of Realtors®.

The latest monthly data shows total existing-home sales¹ rose 5.0 percent to a seasonally adjusted annual rate of 4.61 million in December from a downwardly revised 4.39 million in November, and are 3.6 percent higher than the 4.45 million-unit level in December 2010. The estimates are based on completed transactions from multiple listing services that include single-family homes, townhomes, condominiums and co-ops.

Lawrence Yun, NAR chief economist, said these are early signs of what may be a sustained recovery. “The pattern of home sales in recent months demonstrates a market in recovery,” he said. “Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market.”

For all of 2011, existing-home sales rose 1.7 percent to 4.26 million from 4.19 million in 2010.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to another record low of 3.96 percent in December from 3.99 percent in November; the rate was 4.71 percent in December 2010; recordkeeping began in 1971.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said more buyers are expected to take advantage of market conditions this year. “The American dream of homeownership is alive and well. We have a large pent-up demand, and household formation is likely to return to normal as the job market steadily improves,” he said. “More buyers coming into the market mean additional benefits for the overall economy. When people buy homes, they stimulate a lot of related goods and services.”

Total housing inventory at the end of December dropped 9.2 percent to 2.38 million existing homes available for sale, which represents a 6.2-month supply² at the current sales pace, down from a 7.2-month supply in November.

Available inventory has trended down since setting a record of 4.04 million in July 2007, and is at the lowest level since March 2005 when there were 2.30 million homes on the market.

“The inventory supply suggests many markets will see prices stabilize or grow moderately in the near future,” Yun said.

After reaching a 19-month high, pending home sales eased in December but stayed above year-ago levels, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, declined 3.5 percent to 96.6 in December from 100.1 in November but is 5.6 percent above December 2010 when it was 91.5. The data reflects contracts but not closings.

Lawrence Yun, NAR chief economist, said the trend line remains positive. “Even with a modest decline, the preceding two months of contract activity are the highest in the past four years outside of the homebuyer tax credit period,” he said. “Contract failures remain an issue, reported by one-third of Realtors® over the past few months, but home buyers are not giving up.”

Yun said some buyers successfully complete the sale after a contract delay, while others stay in the market after a contract failure and make another offer. “Housing affordability conditions are too good to pass up,” he said. “Our hope is lending conditions will gradually improve with sustained increases in closed existing-home sales.”

Home sales rose in December to the highest pace in nearly a year. The gain coincides with other signs that show the troubled housing market improved at the end of last year.

Still, sales remain depressed and ended 2011 well below healthy levels.

The National Association of Realtors said Friday that sales increased 5 percent last month to a seasonally adjusted annual rate of 4.61 million, the best level since January 2011 and the third straight monthly increase.

For the year, sales totaled only 4.26 million. While that’s up from 4.19 million the previous year, it’s below the 6 million that economists equate with healthy housing markets.

Sales are increasing at a time when the market is flashing other positive signs. Mortgage rates are at record-low levels. Homebuilders have grown slightly less pessimistic because more people are saying they might be open to buying a home this year. And home construction picked up in the final quarter of last year.

The median sales price rose 2.3 percent to $164,500 in December.

Hiring has also improved, which is critical to a housing rebound. Applications for unemployment benefits are near a four-year low. The unemployment rate fell in December to its lowest level in nearly three years. And companies are coming off their best six-month stretch for hiring since 2006.

Still the housing market has a long way to go before it is fully recovered from the housing bust four years ago. In the last four years, home sales have slumped under the weight of foreclosures, tighter credit and falling price.

Fewer first-time buyers, who are critical to a housing recovery, are in the market for a home. Purchases by that group fell last month to make up only 31 percent of sales. That’s down from 35 percent in November. In healthy markets, first-time buyers make up at least 40 percent.

At the same time, homes at risk of foreclosure made up a third of all sales last month. In healthy markets, they comprise 10 percent of sales. Investors are increasingly buying homes priced under $100,000.

Still, Sales rose across the country in December. They increased on a seasonal basis by more than 10 percent in the Northeast, 8.3 percent in the Midwest, 2.9 percent in the South and 2.6 percent in the West.

The glut of unsold homes declined to 2.38 million homes. At last month’s sales pace, it would take a nearly 7 months to clear those homes. Analysts say a healthy supply can be cleared in about six months.

By  Timothy R. Homan

Jan 6, 2012 8:34 AM ET

Payrolls in U.S. Climb 200,000; Unemployment Falls to 8.5%

by Kyle Colona on January 5, 2012

The Federal Reserve is sticking its toe into the bog of the housing finance sector and recommending more action by the federal government to bring the market out of its hibernation.

In what the Wall Street Journal calls an “unusual foray into housing policy,” the Fed released a report calling for more “aggressive action” from Congress and other policy makers to loosen lending standards and tapping into those dead dogs Fannie Mae and Freddie Mac to kick start a housing recovery.

But the Fed’s play seems rather bizarre given that many on the street believe that the behemoth housing GSEs contributed mightily to the mortgage meltdown by lowering underwriting standards in the years leading into the housing market meltdown.

In fact, the Fed paper said in part: “some actions that cause greater losses to be sustained by the companies in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery.”

This sounds like the typical “constructive ambiguity” that Federal Reserve statements usually are wrapped in, whether or not on Three Kings Day or any other day. Was it not Einstein who said that insanity is doing the same thing over and over and expecting a different result?

But let me not digress.

In any event, the Journal is also reporting that the central bank has lowered short-term interest rates close to zero and rates will most likely remain there until the middle of next year – that is, well after the current presidential election is decided.

While the low rates have kept mortgage rates to their lowest recorded levels, borrowers have not been able to reap the rewards because they lack equity in their once over valued homes and related credit scores have become tarnished and incomes continue to shrivel as the laggard known as the US economy stumbles along.

And let’s not forget that Fannie and Freddie have been sitting in a government conservatorship at a cost to taxpayers of mover $150 billion and this is hindering the real estate market from recovering. Meanwhile in a related story the Huffington Post notes that the Federal Reserve also contends that that relying on foreclosures to clear the housing markets is “costly and inefficient” since this “can lead to deteriorating homes and weigh on the property values in the surrounding community.”

So the Fed paper also said that lenders should pursue loan modifications and servicers should offer “more incentives to seek alternatives to foreclosure.” But the Obama administration has already pursued policies aimed at encouraging lenders to modify loans with very limited success.

In fact, the “Home Affordable Modification Program”, which Obama announced in February 2009 has helped less than 700,000 borrowers as of October 2011, far fewer than is required to salvage the ravaged housing market where 3 to 4 million homeowners are in danger of losing their homes.

In the final analysis, the troubles in the real estate finance sector continue to be the key albatross around the neck of the US economy, an albatross that is sure to become part of the political rhetoric as we head further into the 2012 presidential election campaign.

Kyle Colona is a New York based freelance writer and a Feature Writer for the Compliance Exchange. He has an extensive background in legal and regulatory affairs in the financial services sector and his work has appeared in a variety of print and on-line publications.

National Association of Realtors

Washington, DC, December 29, 2011

Pending home sales continued to gain in November and reached the highest level in 19 months, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, increased 7.3 percent to 100.1 in November from an upwardly revised 93.3 in October and is 5.9 percent above November 2010 when it stood at 94.5. The October upward revision resulted in a 10.4 percent monthly gain.

The last time the index was higher was in April 2010 when it reached 111.5 as buyers rushed to beat the deadline for the home buyer tax credit.

“November is doing reasonably well in comparison with the past year. The sustained rise in contract activity suggests that closed existing-home sales, which are the important final economic impact figures, should continue to improve in the months ahead,” Yun added.

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