The residential market worsened significantly in November as the shock impact of the credit freeze cut existing home sales 8.6% after they had been approximately steady for a year. New home sales had fallen 5.6% the previous month with the first impact from the credit freeze. It appeared earlier in new home sales which are measured at the time of the sales contract while existing home sales are measured at the time of the real estate closing.

Overall, home sales fell 9.2% in November. But progress toward a balanced market continues with inventories of homes for sale falling 0.5% from October. The inventory is now 8.7% below the peak level last July. Sale prices declined at an accelerating rate for existing homes. The median sale price decreased 2.8% in November to 13.2% below a year ago.

Further sales drops are likely for a few more months but the month to month declines should be smaller than in October and November. Both home affordability and consumer confidence are up significantly from September.

Regional differences in the housing market are very prominent in the last few months. November new home sales increase 11% in the West where many homebuilders are selling homes at distress prices, often to speculators. New home sales were up 14.3% in the Northeast but the key market driver was different. The economy is stronger in this region be cause of its mix of industries. And home prices have fallen much less than elsewhere in the country and appear to be stabilizing now.

November new home sales fell 16.4% in the Midwest. This steep fall is probably due to heightened anxiety about the outlook for the key motor vehicle industry. Decembers’ decision in Washington to demand a trimming of industry jobs and wages will keep Midwest home sales falling.