Sales declined in all four regions, led by a slump in the West, where a lack of inventory restrained activity. Demand decreased 8.5% in the West, 4.1% in the Midwest, 3% in the Northeast and 2.4% in the South.
“It’s a clear loss of momentum,” NAR Chief Economist Lawrence Yun said at a news conference as the figures were released. “Even with the weakening, we expect home sales to be the best in seven years.”
Cash transactions accounted for about 32% of all purchases, compared with 30% a year earlier, the report showed.
Sales of distressed property, including foreclosures, accounted for 14% of the total last month, unchanged from October.
Existing-home sales, which are tabulated when a purchase contract closes, are recovering from a 13-year low of 4.11 million in 2008 after reaching a record 7.08 million in 2005.
The housing rebound this year has gained traction amid job gains and rising stock values. Residential construction starts soared in November to a five-year high, helping explain why builder optimism this month matched the highest level since 2005.
Sustained demand and a shortage of properties for sale have allowed builders including Toll Brothers Inc. and Lennar Corp. to raise prices. At Miami-based Lennar, the average price for a new house rose 18% to $307,000 in the three months ended Nov. 30. Orders climbed 13% to nearly 4,500 properties and the average sale price was up 18% to $307,000, the company reported this week.
At the same time, borrowers are incurring higher interest costs. The average 30-year, fixed-rate mortgage was 4.42% for the week ended Dec. 12, compared with 3.32% a year ago, according to Freddie Mac in McLean, Virginia.
Rates could rise further as the Fed prepares to pare its monthly bond purchases in January from $85 billion to $75 billion, the first steps toward unwinding an unprecedented stimulus begun during the recession that ended in June 2009.
“If incoming information broadly supports the committee’s expectation of ongoing improvement in labor-market conditions and inflation moving back toward its longer-run objective, the committee will likely reduce the pace of asset purchases in further measured steps,” the Federal Open Market Committee said yesterday after a two-day meeting.
Home-price appreciation and sales growth have taken a hit from rising rates and U.S. fiscal uncertainty, Lennar Chief Executive Officer Stuart Miller said. Those headwinds should dissipate as the recovery gains strength, he said.
“The short supply of available homes and pent-up demand, along with a generally improving economy, will continue to drive the housing recovery forward,” Miller said on a Dec. 18 earnings call. “We’re anticipating a robust spring selling season.”
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