Sales of existing homes beat expectations in November, with Realtors reporting a surprisingly modest effect in the Northeast from Superstorm Sandy.
An even bigger surprise was a huge gain in activity among higher-end homes. Sales of homes priced above $750,000 jumped 50 percent from a year ago, as sales of the lowest-end homes (largely distressed) fell 4 percent, according to the National Association of Realtors.
The change in the mix of homes selling pushed the median home price nationally (median defined as half selling higher and half selling lower) to $180,600, a 10.1 percent increase from November of 2011. This is a far higher jump than other so-called “repeat” sales indices have shown, because a median measure does not compare the sale prices of homes selling now to similar homes selling a year ago, but the median of all sale prices nationally, which is skewed to which types of homes are selling. Still, the shift to more activity in higher price ranges is important.
“An increase in the median price has a direct effect on the economy and economic growth,” noted the Realtors’ chief economist Lawrence Yun. That is because more income is generated in the sale of a higher-priced homes. Realtors get larger commissions, mortgage lenders charge higher fees, interest payments on mortgages are higher; even secondary expenditures like lawn care and home improvements are higher on a higher-priced home, either due to its size or the income and spending ability of its buyer.
The shift in the mix is due to more owner-occupants buying move up homes, and fewer investors buying distressed properties. Some claim wealthier buyers are selling fast now so they don’t get hit with higher capital gains taxes, a possible result of so-called “fiscal cliff” negotiations, but the likely driver of these sales is more simple: Improvement in the overall housing market, the economy and consumer sentiment.
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