The credit crunch has stiffled sales in November. Existing Home Sales tumbled by 8.6% from October to 4.49 million and decline by 10.6% over the past year. Single family home sales dropped by 8% to 4.02 million which is 8.8% below year ago level. Condo/co-op sales plunged by 13% to 470k, which is 23.1% below their year ago level. It is estimated that distressed sales (either foreclosure or short sales) accounted for about 35% to 40% of the sale. Foreclosure is a legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. A Short Sale simply means that a property is sold for less than what is owed to the lender, who agrees to accept a discounted payoff and release the lien that is secured to the property.

Inventory of home available for sale rose by just 0.1% to 4,203k after reaching a record 4,575k in July, that is 0.3% below its year ago level. However, it still represents a very high 11.2 month supply at the current sales pace. Stock of unsold single family homes rose by 1.4% to 3,550k, 1.1% below its year ago level, but still a very high 10.6 month supply. Unsold inventories of condos/co-op on the other hand, declined by 6.4% to 635k, which was 4.1% above its year ago level, but still a stunning 16.7 month supply. Home prices continued to plunge compared to their year ago level. Average prices have fallen by 12.3% while median price have decreased by 13.2% to $181,300.

Western Region:

While existing home sales have stumbled nationwide, sales in western region rose 9 % last month from a year ago level. About 85,000 existing home and condos were sold in November. The allure of bargain-priced foreclosed homes and favorable interest rates continued to drive sales in California, Nevada and Arizona, hotbeds of bank-owned properties. These sales helped pull down the median home prices in the region by 25.5% from a year ago to $242,500. Regular sellers don’t want to compete with bank pricing right now. Los Angeles, Phoenix, Las Vegas and San Diego were among the top major metro areas in the country to register an increase in home sales last month. Existing home sales in Los Angeles soared nearly 51% in November from a year ago level but slowed about 33% from October. The median home price dropped by 39% from last year to $280,000.

Bottom line:

Existing home sales peaked during summer of 2005 fell steadily through September 2007. From then through October 2008, home re-sales have been relatively flat, suggesting a bottom may have been reached. However, sales slumped again in November, reflecting the effect of credit crunch. The inventory of unsold homes is still very high, putting downward pressure on both new construction and home prices. Home prices declines have accelerated in recent months. As long as inventories stay very high and high proportion of sales are distressed (steep discount from the foreclosure and short sales) price will continue to decline. A recovery in housing market is unlikely until home prices stabilize. Home prices will stabilize when the excess inventory is absorbed by the market. How long this might take is still unclear, hopefully it'll become more clear in 2009.