NEW YORK (CNNMoney.com) — Existing home sales picked up steam in November, though they are still down nearly 30% from this time last year.
Sales of previously-owned homes jumped 5.6% in November to an annual rate of 4.68 million, the National Association of Realtors reported Wednesday. The rate was down 27.9% from 12 months earlier, when a homebuyer tax credit helped lift sales to a two-year high of 6.49 million.
Despite low home prices and mortgage rates, the housing market has continued to struggle through the recovery. Existing home sales slowed in October, following two straight months of gains. But those gains came after home sales sank 27% in July, hitting the lowest levels in 15 years.
“This report doesn’t necessarily mean the housing market is getting better,” said economist John Canally of LPL Financial. “We’ve taken a couple steps forward, one step back, and this is a step forward, but next month might be another step back — these things tend to go in fits and starts.”
But Lawrence Yun, NAR’s chief economist, is hopeful that homebuyers will take advantage of improving affordability.
“The relationship recently between mortgage interest rates, home prices and family income has been the most favorable on record for buying a home since we started measuring in 1970,” he said. “Therefore, the market is recovering and we should trend up to a healthy, sustainable level in 2011.”
The inventory of homes on the market dropped 4% in November to 3.71 million units. Canally said inventories are well below their peak, but a level around 2.2 million units is considered healthy.
The median price of all existing homes sold during November was $170,600, up a modest 0.4% from a year ago. About two-thirds of homes sold during the month were in foreclosure, NAR said.
“The fact home prices went up is a good sign and shows that the housing market is continuing a slow recovery,” said Canally. “But home prices are still bouncing along the bottom.”
While Canally said the housing market has a long way to go on its road to recovery, he agreed with Yun that sales are likely to gradually improve in the coming year.
“Banks still aren’t willing to lend, but we’re working down that inventory, the job market is getting better and affordability is at an all-time high,” he said. “And now that we’re six months removed from the homebuyer tax credit there’s nothing pushing the market one way or another, so we’ll get a gradual recovery — no boom and no bust.”