U.S. Existing Home Sales Rise in November

• Existing home sales in the US rose by 5.9% to 5.04 million annualized units in November 2012 from the revised 4.76 million (previously was 4.79 million) reported in October. Market expectations had been for sales to rise to 4.90 million in November.
• Homes available for sales dropped by 3.8%, which when combined with the jump in sales, resulted in the months’ supply of unsold homes falling to 4.8 in November from 5.3 in October.
• The median price of existing homes was up 10.1% on a year-over-year basis and up slightly from the 10.0% increase in October, because inventories tightened and the share of distressed property sales declined from a year ago.
• With a second consecutive monthly increase in November, the average level of home sales in October and November combined was an annualized 21.9% above its third-quarter 2012 average. Along with improvements in housing starts, permits, and builders confidence in the fourth quarter of 2012 to date, these provided further evidence that, despite concerns about the fiscal cliff and disruptions from Hurricane Sandy, residential investment will post a seventh consecutive quarterly improvement in the fourth quarter of 2012 although we continue to expect overall fourth-quarter 2012 GDP growth to slow to a 1.4% rate from the 3.1% jump in the third quarter of 2012 reported earlier today. Fiscal cliff uncertainty is likely having a larger dampening effect on business investment and inventory growth is not likely to repeat the outsized build in the third quarter of 2012 in the fourth quarter of 2012.

There were 5.04 million existing homes sold in the US in November 2012, on a seasonally adjusted and annualized basis. That marked a stronger than expected 5.9% increase from a revised 4.76 million sales rate in October. The increase in resale activity reflected gains in both single-family homes, and condos and co-ops. Single-family home sales rose by 5.5% to 4.44 million with condos and co-ops sales up by 9.1% to 0.60 million in November. Sales rose in all four regions with sales in the Northeast (6.9%), Midwest (7.2%), and South (7.9%) posting solid increases. Sales rose a modest 0.8% in the West. The report noted that areas affected by Hurricane Sandy showed storm-related disruptions; however, this did not prevent a gain in sales in the Northeast region overall.

The absolute number of existing homes available for sale fell 3.8% to 2.03 million units in October. At October’s pace of sales, it would take 4.8 months to clear this inventory of unsold homes, which is down from the reading of 5.3 in October. This marked the lowest months’ supply of homes for sale since October 2005.

The national median sales price of existing homes rose by 10.1%, on a year-over-year basis, in November, was up marginally from the 10.0% increase in October, and marked the ninth consecutive month of year-over-year price growth. The strong gain in prices comes as distressed sales (foreclosures and short sales that typically sell at steep discounts) accounted for 22% of total sales, which was down from 24% in October and well below the 29% reading in November 2011.

With a second consecutive monthly increase in November, the average level of home sales in October and November combined was an annualized 21.9% above its third-quarter 2012 average. Along with improvements in housing starts and permits, and builders confidence in the fourth quarter of 2012 to date, these provided further evidence that, despite concerns about the fiscal cliff and disruptions from Hurricane Sandy, residential investment will post a seventh consecutive quarterly improvement in the fourth quarter of 2012 and likely at a stronger pace than the already solid 13.6% third-quarter 2012 gain. We expect this will not prevent a near-term slowing in GDP growth in the fourth quarter of 2012 to a 1.4% rate from the 3.1% third-quarter 2012 gain reported earlier today with fiscal cliff uncertainty likely having a larger dampening effect on business investment and inventory growth not likely to repeat an outsized third-quarter 2012 build; however, the apparent durability of the recovery in housing markets bodes well for our expectation that growth in the US economy will pick up during the second half of 2013 once beyond some near-term fiscal restraint.

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.

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