Existing-Home Sales Rise 7.4%
DECEMBER 22, 2009, 10:06 A.M. ET
By JEFF BATER, LUCA DI LEO and MEENA THIRUVENGADAM
http://online.wsj.com/article/SB126148828270801485.html?mod=djemalertNEWS
WASHINGTON -- Sales of previously owned homes rose in November more than expected as low prices and tax relief
helped buyers surmount worries about the job market.
Separately, the economy's recovery wasn't as strong as earlier thought, the government said Tuesday, revising its thirdquarter
numbers down for the second time to show lower construction and inventory investments.
Used-home sales rose by 7.4% to a 6.54 million annual rate from 6.09 million in October, the National Association of
Realtors said Tuesday.
Inventories kept shrinking. Prices fell -- but the decline was the smallest in two years.
Economists surveyed by Dow Jones Newswires expected a 3.3% increase in sales during November, to a rate of 6.30
million.
While credit conditions remain difficult and joblessness in the U.S. sits at 10%, historically low prices and borrowing
costs are supporting purchases. The economy is recovering from recession, and first-time buyers can get an $8,000 tax
incentive.
"This clearly is a rush of first-time buyers not wanting to miss out on the tax credit," NAR economist Lawrence Yun said
Going forward, the realtors expect a temporary sales drop, with a sales surge in the spring.
The report Tuesday was another positive for the housing market, recovering from a big bust. Year over year, resales were
44.1% higher last month than the level in November 2008. October existing-home sales rose a revised 9.9%; originally,
NAR said sales surged 10.1%.
The average 30-year mortgage rate was 4.88% in November, down from 4.95% in October, Freddie Mac data showed.
The NAR reported the median price for an existing home last month was $172,600, down 4.3% from $180,300 in
November 2008. The decline was the smallest since a 4.1% drop in November 2007.
Inventories of previously owned homes decreased by 1.3% at the end of November to 3.52 million available for sale. That
represented a 6.5-month supply at the current sales pace, compared to 7.0 in October; the 6.5 was the lowest in nearly
three years.
Regionally, sales in November compared to October rose 6.6% in the Northeast, 8.4% in the Midwest, 4.8% in the South
and 10.6% in the West.
Of the 6.54 million in overall U.S. resales, 33% were distressed, which includes foreclosures. That compares to a range oh
45% to 50% in months during late 2008 and early 2009.
U.S. GDP Revised Downward Again
Gross domestic product rose at a 2.2% annual rate July through September, after falling by 0.7% in the second quarter,
the Commerce Department reported in its third GDP estimate. Last month, the department revised its third-quarter
GDP growth estimate to 2.8% from an originally reported 3.5%.
The new figure was below Wall Street forecasts. Economists surveyed by Dow Jones Newswires were expecting the GDP
revision to show growth of 2.7%.
The U.S. economy, emerging from its worst recession since the Great Depression, expanded for the first time in more
than a year between July and September 2009.
Although Tuesday's report confirmed that the economy grew as the government's stimulus boosted consumer spending,
the latest numbers showed downward revisions to nonresidential fixed investment and to private inventory investment.
Moreover, the GDP breakdown showed consumer spending rose a quarterly 2.8% in the third quarter, slightly down
from the earlier estimate that spending had risen by 2.9%.
Still, the rise in GDP was the first since the second quarter of 2008 and the strongest in nearly two years.
Strong data out earlier this month indicate that GDP, a broad measure of economic activity, should grow by more in the
final three months of the year. U.S. retail sales surged by more than expected in November and, for the first time in three
months, consumer confidence increased, figures showed Dec. 11.
In another sign that the recovery was sluggish, the GDP report Tuesday showed gauges measuring third-quarter price
inflation were subdued.
The government's price index for personal consumption increased 2.6% in July through September, compared to the
previously estimated 2.7% climb.
The core PCE gauge, which excludes volatile food and energy prices, increased 1.2% in the third quarter, compared to the
previously estimated 1.3% rise.
Low inflation and a fragile recovery led the Federal Reserve to reiterate last week that interest rates will stay close to a
record low near zero for several months at least.
Corporate profits after tax without inventory valuation and capital consumption adjustments rose by 13.8% in the third
quarter, the report showed Tuesday.
Profits with inventory valuation and capital consumption adjustments rose by 10.8% in the July-to-September period,
the biggest increase since the first quarter of 2004. Companies have been cutting costs by slashing jobs, leading to a
spike in unemployment.
The government's first estimate of fourth-quarter GDP -- and for the economy's overall performance in 2009 -- will be
released Jan 29.
Write to Luca Di Leo at luca.dileo@dowjones.com and Meena Thiruvengadam at
meena.thiruvengadam@dowjones.com
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