Sales of existing homes, or resales, dropped sharply in November to the slowest pace in 19 months, with some of the blame going to longer home-closing timeframes, according to the latest data from National Association of Realtors.
The housing market is experiencing some bumps along the road to fully adopting new “Know Before You Owe” rules that are meant to clarify mortgage terms for borrowers.
Sine Oct. 3, the Consumer Financial Protection Bureau has required lenders to provide a “Loan Estimate” within three business days of the borrower submitting an application. At least three business days before closing, the borrower now also gets the new “Closing Disclosure” containing a summary of the final terms of the loan.
The primary reason for the drop in home sales in November is likely “an anomaly” as the industry adjusts to the new Know Before You Owe rules, says Lawrence Yun, NAR chief economist.
“Sparse inventory and affordability issues continue to impede a large pool of buyers’ ability to buy, which is holding back sales,” he said. “However, signed contracts have remained mostly steady in recent months, and properties sold faster in November. Therefore it’s highly possible the stark sales decline wasn’t because of sudden, withering demand.”
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 10.5 percent to a seasonally adjusted annual rate of 4.76 million in November. That’s the lowest level since April 2014 at 4.75 million.
After October’s decline (largest since July 2010 at 22.5 percent), sales are now 3.8 percent below a year ago — the first year-over-year decrease since September 2014.
According to Yun, although Realtors are adjusting accordingly to the “Know Before You Owe” initiative, the main takeaway so far has been the need for longer closing times.
According to NAR’s Realtors Confidence Index, 47 percent of respondents in November reported that they are experiencing a longer time to close compared to a year ago, up from 37 percent in October.
“It’s possible the longer timeframes pushed a latter portion of would-be November transactions into December,” says Yun. “As long as closing timeframes 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.”
The median existing-home price for all housing types in November was $220,300, which is 6.3 percent above November 2014 ($207,200). November’s price increase marks the 45th consecutive month of year-over-year gains.
Total housing inventory at the end of November decreased 3.3 percent to 2.04 million existing homes available for sale, and is now 1.9 percent lower than a year ago (2.08 million). Unsold inventory is at a 5.1-month supply at the current sales pace, up from 4.8 months in October.
“Realtors worked hard to prepare for Know Before You Owe, and we knew there would be some near-term challenges as the industry continues to adapt,” says NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. “Nonetheless, an early trend of longer lead times to closings is cause for concern. As Realtors report 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.”