Existing Home Sales Tumble, Post First Annual Decline In 29 Months On Day After Taper Begins

Tyler Durden's picture

If anyone is still wondering why back in June Zero Hedge first presented what the adverse impact on housing affordability as a result of soaring rates, today's NAR release on existing home sales should set all questions to the side. Because after rising in a seemingly relentless fashion, existing home sales have (and this is before the traditional downward revision by Larry Yun's conflicted organization which will expose all of its numbers as flawed regardless) finally hit a brick wall, and not only did November existing home sales tumble from 5.12MM to 4.90MM, missing estimates of 5.02MM, they also posted the first year over year decline in 29 consecutive months of increases.

Of course, as a reminder only 40% of house buyers actually use a mortgage, and the remaining 60%, as Goldman estimated recently, are all cash. Which means that not only are the all cash buyers fading out of the housing market at an ever faster pace, but if left only to the mortgaged-buyers, then watch out below.

Finally, and as usual, in addition to rising rates, Larry Yun was quick to cast blame on lack of inventory and supply. Perhaps he should speak to the likes of Bank of America which are keeping millions of empty units on its books following fraudulent foreclosure practices, in a desperate attempt to extract that one final bit of inventory subsidy from the housing market.

From the NAR release:

Existing-home sales fell in November, although median prices continue to show strong year-over-year growth, according to the National Association of Realtors®.


Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 4.3 percent to a seasonally adjusted annual rate of 4.90 million in November from 5.12 million in October, and are 1.2 percent below the 4.96 million-unit pace in November 2012.  This is the first time in 29 months that sales were below year-ago levels.


Lawrence Yun, NAR chief economist, said the market is being squeezed. “Home sales are hurt by higher mortgage interest rates, constrained inventory and continuing tight credit,” he said. “There is a pent-up demand for both rental and owner-occupied housing as household formation will inevitably burst out, but the bottleneck is in limited housing supply, due to the slow recovery in new home construction. As such, rents are rising at the fastest pace in five years, while annual home prices are rising at the highest rate in eight years.”


The national median existing-home price for all housing types was $196,300 in November, up 9.4 percent from November 2012. Distressed homes – foreclosures and short sales – accounted for 14 percent of November sales, unchanged from October; they were 22 percent in November 2012. A smaller share of distressed sales is contributing to price growth.


Nine percent of November sales were foreclosures, and 5 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in November, while short sales were discounted 13 percent.


Total housing inventory at the end of November declined 0.9 percent to 2.09 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace, compared with 4.9 months in October. Unsold inventory is 5.0 percent above a year ago, when there was a 4.8-month supply.


The median time on market for all homes was 56 days in November, up from 54 days in October, but well below the 70 days on market in November 2012. Short sales were on the market for a median of 120 days, while foreclosures typically sold in 59 days, and non-distressed homes took 55 days. Thirty-five percent of homes sold in November were on the market for less than a month.


According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.26 percent in November from 4.19 percent in October; the rate was 3.35 percent in November 2012.

More so-called NAR "data"

All-cash sales comprised 32 percent of transactions in November, up from 31 percent in October and 30 percent in November 2012. Individual investors, who account for many cash sales, purchased 19 percent of homes in November, unchanged from October and from November 2012. Last month, seven out of 10 investors paid cash.


Single-family home sales fell 3.8 percent to a seasonally adjusted annual rate of 4.32 million in November from 4.49 million in October, and are 0.9 percent below the 4.36 million-unit level in November 2012. The median existing single-family home price was $196,200 in November, which is 9.4 percent above a year ago.


Existing condominium and co-op sales dropped 7.9 percent to an annual rate of 580,000 units in November from 630,000 units in October, and are 3.3 percent lower than the 600,000-unit pace a year ago. The median existing condo price was $197,400 in November, up 10.0 percent from November 2012.

What can we say: perfect timing for Ben to start tapering.

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FieldingMellish's picture

Taper hasn't begun yet. It was only announced.

thunderchief's picture

I have one property that I faithfully paid off over the years, and in the process I have learned a few things about real estate. Here they are...

1) You never own your property, the government does and can take it from you whenever they like.

2) You will be taxed to death, including your kids, to the point it will seem like a life of being raped, property taxes, death taxes, inheritance taxes and on and on.

3) You will be nickel and dimed to the point you will have spent as much over 30 years as it cost to build a brand new home on the same piece of land.

4) Your neighborhood will go to hell, because people are not like you, and not as responsible as you.

5) Renters are even worse and complete slobs, even if you treat them great. That is why most belong in big corporate apartments where they can be threatened like most who work for big companies. Run a mom and pop rental house, do everything right and see what assholes and slobs your average American family is.

6) Property management companies are even worse, even the best.

7). Fuck real estate, buy physical gold and silver

BKbroiler's picture

Fuck real estate


This year I had the option of buying a small home in cash or putting 20% on a building and renting out the bottom 2 floors.  In both cases I would live for free, but I went with the small home because coming home to tenants, repairs, ie:more work, after working all day was not worth it to me.  When I leave work I want to leave work.  

Sudden Debt's picture


WhyDoesItHurtWhen iPee's picture

NAR (Natural Ass Rapists) or (Narcotic Asset Rehypothicators)

duo's picture

no, this is the beginning of the sudden stop of all spending by the private sector as the horror of Obamacare takes effect.

darteaus's picture

Now THAT is going to be a might big straw on the economy's back. Add in: the duration of the "bull" market, the TOTAL economic cluelessness in DC, EU and JPN "leadership", MASSIVE US, EU and JPN debt, and the near end of the typical 5-7 year real estate cycle and you have a serious burden.

Professor Fate's picture

Yup!  Obamacare will suck the last vestiges of discretionary income right out of the middle class...guaranteed.  The biggest net tax increase in history and right in the middle of one of the deepest recessions / depressions on record.  Images of Choom and his Wookie will be immortalized in the history books as an example of what happens to economies when dolts and idiots have a free hand.

Fate the Magnificent
"Push the Button, Max"

SDShack's picture

Yep, 0zer0care sticker shock becomes 0zer0care WALLET shock Jan 1, 2014. Enjoy this Christmas season because this year the Grinch comes after New Years Day to steal everything you have left.

ChaosEquilibrium's picture

ZH is spot ON!!


FED tapering has nothing to do with employment or a "STRONG ECONOMY"


IT was due to a technically broken collateral market!


The FED tightening into a collapsing market.......next up CAPITAL CONTROLS AND BAIL-INS!!!


AMERICA........You have been snookered, manipulated, and left out to dry(DIE)!!!

Winston Churchill's picture

You've got it.

They think all their preps  are ready.

Capital controls are already in place , simple to lower the limits on

transactions.Bail ins.That what those billions of hollow point are for.

Its all downhill from here.

ChanceIs's picture

It was due to a technically broken collateral market...

Am not sure what you mean here.  Are we talking trading technicals...e.g. 50 day moving averages? Housing as collateral certainly has "broken."  That started in June.  There is some chicken and egg question there.  Did the all cash buyers dissapear first - maybe it was the renters - maybe it was the rising interest rates.

If - as I think you are suggesting - the Fed is responding to the fact that the collateral supporting all leverage in this over levered economy is evaporating, then they are about 5 years behind.  Of course it would have taken until about 2012 for the housing market to correct to natural levels if left unmolested.  Now it will take until 2016.

Maybe you are talking about the collateral on the Fed's balance sheet and how the Fed was quickly becoming (had become) insolvent.  Don't tell me you think that they have stopped thinking that they can print forever!!!  Thing that makes the most sense to me is that Bernanke wanted to emboss his legacy by showing that the tapering had begun on his watch - you know - to prevent a real bond bubble.

I can see the December 2014 cover of Time Magazine - Janet Yellen - Biggest Bagholder of the Year.

darteaus's picture

IMHO, Ben ANNOUNCED a 15% taper to cover his withdrawal. Now if inflation blows up, or the economy craps out and Yellen prints like Zimbabwe, he can argue, "It wasn't me!"

Tanzhosen's picture

Zero Hedge really can be a laugh some times.  Existing home sales tumble because of lack of inventory and buyers still futily angling for the deals of 2 years ago that have all dried up, that's why yesterday housing starts hit the highest in 6 years.

If you want to make the argument for why the housing market might be entering another bubble, that's an interesting conversation, but this story is just one big yawn.

Winston Churchill's picture

I don't know where you live.If its stateside, try driving

around residential districts at night.Most roads have empty houses

being held off the market.In S.Florida even short roads have

4 or 5.

Shortage of inventory.In your dreams.

Market rigging and more mal investment.

Tanzhosen's picture

I guess maybe in the exurbs?  Those areas may never recover.

Housing inventory stats are what they are.  12 months supply when the bubble popped, 4 months now (6 months considered 'healthy').  You can try to get a pulse for things all you want 'driving around', but you are deluding yourself.

Dingleberry's picture

People aren't buying homes.......hedgies and the like are.

I was/am in the market and track RE religiously.  Had a RE agent and all.  He told me the deal: it's all cash buyers buying the good properties. I waited it out and did not make offers on what was obviously overpriced abodes, and saved easily 10% as many sold later at that discount or more.

As always in RE,.....location, location, location......but in general: 

the time to sell was spring. Now, good luck getting full asking with rates going to 5% easily, unless (as it is increasingly looking like) we go into another formal recession, and judging by jobless rates and what may portend with Obammaycare.

In that case, it's over due to economic contraction.

I was in coastal FL recently, and there was a for sale sign about every 5th-10th house.  My guess is that the gov getting out of the flood insurance biz will crush the market there along with the 5% rates, or even 4%.

Normal people cannot afford 5% rates. Hedgies who get free money from the fed can.

There you go.

Tanzhosen's picture

How in god's name is 5% a high rate on a mortgage?  For the last 40 years, 5% is an insane, unheard-of low rate.  It only looks high compared to the 4% rates of recent years, but the historic average is 7%-8%, and we saw 15% in the 80s.

And this is Zero Hedge, for crying out loud, the land of perpetual forecasting of huge inflation (including calls for hyperinflation, though those seem to have died down recently).  If you believe in all that stuff, a 5% rate is a negative real interest rate, you are basically being paid by the bank every month for your house.

tarsubil's picture

You're assuming that the price of the house is fair. If I buy a Dodge Dart at 1% for $60,000, the bank won't be paying me.

Tanzhosen's picture

Sure, and I can't speak to your neck of the woods specifically, but all over America that are places selling for 13x or less (closer to 9x where I live) annual rent.  That's a fair price no matter how you slice it.

That's why all these cash purchases are flowing in from around the world, incidentally: they offer very attractive rental income relative to price. 

Alea Iactaest's picture

Free tip (perhaps worth what you paid for it): If you post more than 2x to a given thread there are very good odds you are a troll.

Please don't feed the trolls.

Tanzhosen's picture

Got it - any and all debates should be resolved in 4 total messages.  Wouldn't want either party to be in danger of learning something, now would we?

Dingleberry's picture

You know that most people don't care about price....they ONLY care about payments. And they are stretched, which is why rates are a killer.

When rates rise, what happens to principal in order to afford it?

You are correct about rates being insanely low. But incorrect about rents to ownership costs in most areas.

In case you did not notice, cities everywhere are going broke and "homeowners" are paying (much) more for less.

Taxes going up. Insurance going up. Water bills going up. All muni costs are going up, city, county and state.  At least where I live.

Why don't you ask a builder what it would cost to replace a house that burns down since about 5-7years ago.....of course, no inflation now is there? Hence the insurance rises.

Notice how your streets don't get plowed as much? Noticed how you kids classrooms are more crammed?

That's what I see.  So I stayed liquid. And looks like I will reap the rewards for waiting past this last mini bubble. I already did not lose about 50k by waiting. I intend on wating a bit more and see what happens to price when rates hit 5.

Then again....I could always move to Detroit and get a bargain price on a "house".

Tanzhosen's picture

In a vaccuum, the effect of higher mortgage rates (which I agree are likely coming) should be downward pressure on prices.  However, given current monetary policy, higher rates are going to be correlated to (and indeed, somewhat caused by) other indicators which are themselves bullish for housing prices.  So the wait-and-see approach can be dangerous.

Ultimately, if you are paying $1000/mo for rent and see a comparable place for $120,000, I don't see the point in waiting to see what higher rates will do.  They could correlate to even higher prices for the reasons I just mentioned, and now your mortgage is higher.  Whether that option is available to you, though, depends on where you live.

Nostradumbass's picture

Where I live in southern California, we rent a 2000 ft.sq. house for $2150 monthly. No way to purchase this home for less P/E than about 16:1 which would be $413,000. And this would be an absolute rock-bottom low price inconceivable in the neighborhood at this time. More likely to sell for $480-500K which is 19:1.

This is unaffordable and overpriced by any measure.

We are moving out at end of January and will travel full-time for awhile. Saving money all the while...


darteaus's picture

And your budget is $2150/month!  That will go far in S. America where the dollar is still king!

Blankenstein's picture

We are not just going to have the effect of higher rates pushing home prices down, but also the reduction in FHA limits.  As soon as that price support is taken away, look out below.  FHA mortagages are now about 35% of the market.  

darteaus's picture

Where do houses sell for 9x rent?

Here in Silicon Valley you are lucky to get 4% (25x), unless you want to go slumlord.

Yenbot's picture

That's why all these cash purchases are flowing in from around the world

Where did I hear that before? Oh, yeah- Weimar Germany...

Tanzhosen's picture

Wow, lot's of ZH'ers from Weimar Germany.  I really ought to have more respect for my elders.

darteaus's picture

Uh, nobody said they were from Weimar Germany; troll.

darteaus's picture

"When Money Dies" describes the situation where foreign students would buy houses in Germany with their semester's pocket money.

Blankenstein's picture

5% isn't a high rate historically, but if it occurs in the current market, housing prices will be toast.  Why do you think the Bernanke, after the housing market had slowed to a crawl,  pulled out all the stops to keep rates historically low?  So the banks could unload their inventory onto the herd with the help of the NAR and their media propaganda blitz.  People cannot afford these insanely high home prices (with exhorbitant property taxes) even more so with higher interest rates.  

darteaus's picture

"Housing stats are what they are."

Whether that statement is a fact or a belief is the bone of contention here.

indygo55's picture

Ive got several homes in my area that are empty and no sign. Its all over. The banks are holding them off the market. There's plenty of homes, they just aren't on the market until the banks can get more money for them. Its widespread and its well known.





Tanzhosen's picture

Is that where you get your news?  That's an amazing website, looks like the author managed to upgrade from scrawling articles on the wall in his own feces.  Good for him.

Try selling in a major metropolitan area.  As even ZH says, in most places you will be flooded with full-price all cash offers.  Or you can trust your .info friend who says 90% of foreclosures are being held off the market, because everyone knows that banks love to manage empty properties indefinitely.

ChanceIs's picture

Tell us about the prospect of all the home equity loans collapsing as the rates reset.

Tanzhosen's picture

Why?  It sounds like you've got the measure of that situation already.

adr's picture

Wow, this great housing market must be why my house has sat unsold for six months with an asking price $20k below what I paid for it at the market bottom in 2009.

On my block alone there are six empty homes that aren't listed for sale anywhere.

My neighborhood is 92% white with a median income of $52k. Middle class America. There is no slum and no section 8. Must be why investors are staying away.

There are a few hot markets in the USA. The rest is trash.

Tsar Pointless's picture

Well, I live in a quasi-metropolitan area (Pittsburgh), and I see more existing homes that are empty than for sale around where I live. Certainly, I haven't seen many "Sold" signs over the past few months.

Oh, and that wonderful "best new homes sales number in six years" thing from yesterday turned out to be not so much when you look at the uncooked, unseasonally adjusted numbers. I did. Perhaps you should, too.


Click on the PDF hyperlink next to "Current Press Release" and see for yourself.

Tanzhosen's picture

Oh, and that wonderful "best new homes sales number in six years" thing from yesterday turned out to be not so much when you look at the uncooked, unseasonally adjusted numbers. I did. Perhaps you should, too.

I referred to no such number.  I pointed to most housing starts in 6 years as further evidence of the lack of housing.

Winston Churchill's picture

Prolly has more to do with the developers seeing a chance to unload their landbanks.

The land itself is not selling, only way to get rid of it is build it out.

I've seen this movie before , back in the 1970's.

It doesn't end well .

CrashisOptimistic's picture

You're all over this thread.  And that's fine (can you give your locale?)


Have any comments on this link?



Note those levels are those of the 1960s with 50 million fewer people in the country.

Tanzhosen's picture

Southeastern US (not Florida).

That is a fairly stunning chart.  Hard to see how sales levels like that constitute a bubble, isn't it?

And I never disputed that housing sales were low, but prices are undoubtedly higher, while foreclosure rates and REOs on the market have dropped off a cliff.  I think when you combine your chart with the chart for housing starts, it makes sense in that context that the low number of sales is simply due to the low inventory, which is the cumulative result of the 5 years post-bubble.

CrashisOptimistic's picture

I'd say no.

New housing starts includes apartment buildings, as well as single family houses. 

The definitive chart we're discussing of single family homes is trans decade.  And no, don't focus on "bubble".  There are 50 million more people walking around than the 1960s and yet sales (and they have to be started to be built to be sold) are at 1960s levels.

This is not inventory held off a market.  This is new houses.  That allows one to exclude "inventory held off the market" which can obfuscate the measurement.  This chart is the pure measurement.  It is the picture of devastation for one reason only -- because devastation is reality and there's no indication of it ever getting better.

Note the recoveries of the past.  They asserted in months or a year.  Not six. 

This is forever. 

Tanzhosen's picture

It's also devastation that we already knew about and experienced (and yes, are continuing to experience).  We had the worst housing bubble in the history of our continent.

So we had toxic levels of inventory, 12 months at one point!  So housing starts dropped off a cliff and stayed there, and so too purchases.  Clearly though, purchases have now overtaken starts, and the REO market has been almost entirely cleared out (unless you find anecdotes more compelling than hard sales data).  So inventory is now 50% under a 'healthy' market.  This is not a healthy market, on that I think we can agree, but I believe your chart is perfectly consistent with a market that has been healing for quite some time now.

CrashisOptimistic's picture

Guy, how can there be inventory of new single family homes.  They are new.  Is there really any spec building going on that is not multi family?

The chart is not apartment buildings under construction.  New single family homes.

No one keeps them off the market.  They're not in foreclosure inventory.  It's a pure measurement.  The market is not healthy?  There is no market.  There are 50 million more people walking around not buying a house because their personal real income is in relentless, perpetual decline.

It's been five years since the crash and the levels are 1960s.  There is no room here to look for a bright future.  Victory is achieved by declining slower then everyone else.  That's the future.

SDShack's picture

How many of those 50 million are still living at home? Why can't those 20-somethings afford these insanely low rents, low home prices, and low mortgages you say that are out there? Why does 0zer0care keep these same people on their parents insurance until they are 26? Try looking at household formation versus age, and family size versus the 60's or 70's. Also look at minority occupancy family size per unit. No one but real estate trolls believe housing is anything but another bubble, being blown higher by the investor class, not the working class. The reason is because the average American can't afford to own a house anymore. Try looking at average household income growth or wage growth versus average housing cost increases. The average American is being squeezed out of property ownership by design. 

WTC-7's picture

Haha.  Lack of housing.  That sounds familiar...