IRVINE, CA—Everything from harsh winter weather to declining investor interest in the sector could be responsible for November's weak housing numbers, which are not expected to improve this month, says Rick Sharga, EVP of
Sharga says, “In a month where consensus forecasts were all too optimistic, we are reminded that the housing market is recovering in fits and starts, and there remain significant headwinds. Multiple factors may have contributed to November's weaker-than-expected results, including a drop in inventory, declining investor activity, a sharp sales decline in the West, possible reflecting affordability issues, and unexpectedly harsh weather conditions at the end of the month in the Midwest and Northeast.”
An increase in first-time homebuyers—comprising 31% of sales in November, according to NAR—as well as the strengthening pace of annual household formations reported by the Census this fall were key ingredients for normalizing demand for housing among owner-occupiers, according to Auction.com Research. Additionally, a strengthening labor market suggests a firmer basis for demand heading into 2015, while lower mortgage rates and ongoing initiatives to improve mortgage accessibility could motivate more prospective buyers to enter the market.
Predicting results accurately is challenging considering the uneven market recovery and volatility of month-to-month numbers, which NAR's November existing home sales data proves, Auction.com reports. Based on October's sales estimate from NAR, Auction.com predicted that November home sales would measure a seasonally adjusted annual rate of 5.25 million—well above NAR's November data, but in line with consensus estimates.
Historically, Auction.com's predictions have been notably accurate, which makes November's outcome vs. predictions even more unusual, according to Peter Muoio, chief economist for Auction.com. “The Auction.com Nowcast model has been highly accurate in predicting existing home sales over the past 10 months, and our testing has shown over 97% accuracy over a 10-year period, so it's very rare for a number to fall outside of our confidence range like it did in November. This apparent anomaly required a closer look at possible outside factors that the model wasn't able to account for, such as a slowdown in purchases late in the month due to inclement weather, or the potential for November predictions to be skewed somewhat by the unexpectedly strong momentum coming out of October. Because the Auction.com Nowcast is based on an autoregressive model, prior month momentum can sometimes play a significant role in predicting the current month's activity.”
As GlobeSt.com reported earlier this month, experts' predictions vary regarding whether or not rooftops are coming back to the Orange County market. Residential construction has been picking up in Orange County, and some say that the deliveries this year will have a significant impact on the region's commercial real estate. Others, however, are still on the cautious side.
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