Home sales hit slowest pace in six months

WASHINGTON - Fewer Americans bought homes in November, as buying slid to its slowest pace in six months.

The National Association of Realtors said Monday that sales of existing homes fell 6.1 percent to a seasonally adjusted annual rate of 4.93 million. That was down from a revised annual pace of 5.26 million in October. Over the last 12 months, sales have risen 2.1 percent.

The combination of higher home prices and relatively stagnant incomes has reduced affordability and restrained buying. A recent decline in mortgage rates has yet to lure more buyers into the market. At the same time, fewer distressed properties and bargains, which tend to attract investors, are coming onto the market.

"The housing market may still be improving, but it is doing so with two steps forward and one back," said Joel Naroff, president and chief investment officer for Bucks County-based Naroff Economic Advisors Inc.

The Realtors estimate that 2014 sales will end up below 2013 levels. Sales have slumped much of this year after a three-year rally that followed the recession and the implosion of the housing market. Harsh winter weather crippled home buying at the start of 2014. Lower affordability, resulting from tight credit, rising home prices and essentially flat incomes, held back sales for the rest of the year.

The Realtors have estimated that 4.94 million existing homes will be sold this year, down 3 percent from 5.09 million in 2013. Analysts say sales of roughly 5.5 million existing homes is common in a healthy real estate market.

"It is hard to explain the sharp drop in home demand. The weather in November was nothing exceptional and mortgage rates were not that far above the 50-year lows," Naroff said. "One explanation is that the supply of homes for sale is relatively limited - and it is - and so buyers are having a difficult time finding suitable options.

"That makes sense, and a limited supply may restrain home sales for a long time to come, especially when rates rise."

The median price rose 5 percent over the last 12 months to $205,300. That's a positive for owners looking to sell, though it creates an additional challenge for would-be buyers.

The share of first-time buyers climbed to 31 percent in November from a recent average of 29 percent. Still, that's well below the 40 percent share that has been historically common. The modest percentage of first-time buyers is a sign that affordability remains an obstacle for many who would like to purchase but lack the savings or credit record to do so.

November sales fell in all four major geographic regions: Northeast, Midwest, South and West. Buying activity fell over the past 12 months for homes worth less than $250,000.

There are signs that sales may improve in 2015. Mortgage rates have fallen sharply in the past few weeks, which should make homes more affordable. The average rate for a 30-year fixed mortgage dropped last week to 3.8 percent, from 3.93 percent the previous week. That was the lowest level since May 2013.