Existing home sales rebounded 5.6% in November following a 2.2% decline in October.  The overall increase was concentrated in sales of single-family homes that rose 6.7% to 4.15 million following a 2.0% drop in October.  Sales of condos and co-ops dipped for a second consecutive month, falling 1.9% in November after a 3.6% drop in October.  The largest increase was recorded in the West where sales rose 11.7% in November, although sales also increased in the Midwest (6.4%), the South (2.9%) and the Northeast (2.7%) in the month.

The median price of existing homes rose 0.4% on a year-over-year basis, the first increase in three months following 0.9% and 2.4% declines in October and September, respectively. Distressed housing sales (which normally sell at a steep discount) made up 33% of total sales in the month, which was down slightly from 34% in October. The absolute number of homes for sale fell for a third consecutive month, by dropping 4.0% to 3.71 million units following 3.4% and 2.8% declines in October and September, respectively. With sales rising and inventories falling, the months’ supply of unsold homes on the market dropped to 9.5 in November, which is still higher than normal but a sharp improvement from 10.5 the previous month.   

With the increase in November, existing home sales have rebounded 22% after falling to a record low 3.84 million in July 2010 following the expiry of the home buyer’s tax credit in April. We continue to view the past summer as a trough in activity because improving labour markets and historically low mortgage rates gradually draw buyers back into the market. With that said, even with recent increases, the level of home sales remains subdued by historical standards, and the sizeable supply overhang will limit the need for new construction to meet demand going forward.  This situation will likely prevent residential investment from contributing much to overall growth in the near term; however, other sectors of the economy, notably consumer spending, have shown encouraging signs of life in recent months, which, along with the new tax package signed into law last week, prompted us to revise our forecast for 2011 U.S. GDP growth up to 3.3% from 2.8% previously.

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.