Martin Crutsinger, AP Economics Writer, On Wednesday December 22, 2010, 2:13 pm EST
WASHINGTON (AP) — More people bought previously owned homes in November, the third increase in four months after the worst summer season in more than a decade.
Still, economists say it could take years for home sales to return to healthy levels.
Buyers bought homes at a seasonally adjusted annual rate of 4.68 million, the National Association of Realtors said Wednesday. Even with the rise, this year is shaping up to be the worst for home sales since 1997.
Economists say it could take at least two years or longer to return to a more normal level for sales of around 6 million units a year.
“The housing market is still flat on its back, but there are signs that it is starting to pick itself up,” said Mark Zandi, chief economist at Moody’s Analytics. “Even with the improvements we expect, next year will still be a very weak market.”
The housing market is still struggling to recover from a boom-bust cycle which helped trigger a severe economic recession. Home prices have tumbled in most markets and many potential buyers worry that prices could fall further.
The median price of a home sold in November was $170,600.
Zandi said he expects prices will fall another 5 percent from where they are now, hitting a bottom in the summer of next year.
A major problem is the glut of unsold homes on the market. Those numbers fell to 3.71 million units in November. It would take 9.5 months to clear them off the market at the November sales pace. Most analysts say a six to seven-month supply represents a healthy supply of homes.
Analysts said the situation is much worse when the “shadow inventory” of homes is taken into account. These are homes that are in the early stages of the foreclosure process but have not been put on the market yet for resale.
David Wyss, chief economist at Standard & Poor’s in New York, said when these homes are added, the inventory level would actually be about double where it is now.
“There is a big shadow inventory out there of houses that are in the process of foreclosure or are underwater and will go into foreclosure,” Wyss said. “We are still bouncing along the bottom in housing.”
Patrick Newport, a housing economist at IHS Global Insight, said he believed sales of previously owned homes could actually drop farther in 2011, dipping to 4.6 million units and then begin a gradual recovery in 2012. He said it could take until 2014 for sales to return to around 6 million units.
For November, sales were up in all regions of the country led by an 11.7 percent rise in the West. Sales were up 6.4 percent in the Midwest, 2.9 percent in the South and 2.7 percent in the Northeast.
The November increase was driven by a 6.7 percent rise in sales of single-family homes which pushed activity in this area to an annual rate of 4.15 million units. Sales of condominiums dropped 1.9 percent to a rate of 530,000 units.
