Home sales bode well for big picture
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By: Christopher Conkey
WASHINGTON -- Sales of existing homes rose for the second consecutive month in November, a sign of rebounding demand that suggests the economic fallout from the housing market's slump will be limited next year.
The National Association of Realtors said sales of existing homes last month increased 0.6% from October to an annual rate of 6.28 million units, down 10.7% from a year earlier. Spurred by lower interest rates and home prices, sales have now increased in back-to-back months for the first time in more than a year.
Together with a recent upturn in the rate of new-home sales, the modest rise in existing-home sales indicates that home-buying activity may be stabilizing after a yearlong downturn.
"The change was small, but the results were encouraging nonetheless because they suggested activity is beginning to form a bottom" said Michael Moran, chief economist at Daiwa Securities America Inc.
If the housing slump is indeed bottoming out and starts to reverse itself in the months ahead, it would gradually lift a great weight off the broader economy. Housing-related industries have been shedding thousands of jobs in recent months, and builders have been forced to scale back construction to match waning demand. That has been a major factor behind the slowing economy this year, and many economists say growth -- now running at an inflation-adjusted annual rate of about 2.0% -- won't fully bounce back until the housing correction has run its course.
Of course, it is far from certain that the housing slump is over. Inventories of unsold homes remained large in November, with a 7.3-month supply on the market at current sales rates, according to NAR data, up from a five-month supply a year earlier. That suggests builders will continue to cut production until supply is better aligned with demand. In the meantime, large inventories will continue to put downward pressure on prices.
Last month's median home price -- the price at which half of homes sold for more and half sold for less -- was down 3.1% from a year earlier. November was the fourth month in a row that median home prices were down from a year earlier. NAR President Pat Vredevoogd Combs described current conditions as a "window for buyers" to re-enter the market.
Additional support for a rebound is coming from the competitive labor market, which is producing solid wage gains and lifting consumer sentiment. Yesterday, the Conference Board, a private research group in New York, said its gauge of consumer confidence rose to 109 in December from 105.3 in November.
As with the recent data on housing, which generated more relief than enthusiasm among economists, the improved sentiment reading was due more to a moderation in pessimism than any surge in optimism. Indeed, the proportion of those surveyed who said economic conditions are "good" fell slightly to 27.2% this month from 27.5% in November, but that was more than offset by a sharper decline -- to 14.6% from 16.2% in November -- in the number who said the climate is "bad."
More than anything, the data suggest the nation's economy will be able to maintain its current pace of slow-to-moderate growth as the housing imbalance is corrected. "There's nothing signaling a severe downturn or a severe upturn," said Lynn Franco, who oversees the Conference Board survey.
Meanwhile, the number of people filing initial claims for unemployment benefits rose slightly, to 317,000 last week from 316,000 the week before. The figures point to steady job growth.