Nov. sales dip due to new regulation, not weakness

The source of this information is IHS Global Insight, and it's reliable enough for me to repeat it here:

Sales of previously owned homes fell in November, but the reason was not weakness in the housing market. Rather, it was the advent of regulations designed to protect the borrower in home-purchase transactions.

As I have reported several times, November was the first month that sales agreements were closed under the new Truth in Lending Act and Real Estate Settlement Procedures Act integrated-disclosure rules.

The new rules make it easier to compare offers from multiple mortgage lenders, and also give a borrower three business days to review the document and ask questions before closing on a mortgage.

Real estate agents I interviewed expected that the changes would prolong the time from accepted offer to closing.

Certain contract changes can no longer be executed near the date of closing, thus postponing that date.

In the eight-county Philadelphia region, about 80 more home sales closed in November than in the same month in 2014. Year-over-year data tend to offer a more long-term look at trends than month-to-month figures do, which is why I seldom bother with the latter.

On the other hand, 1,000 fewer sales closed in November than in October, which made me wonder a bit until I saw that things seemed to right themselves in December.

Here's the point: When we say there were 4,077 sales in November, we mean that many houses went to the settlement table that month. The sales agreements for those houses typically came 45 to 90 days before the closing, meaning that the contracts were signed in August or September for November closing, and in July or August (or earlier) for October.

There are no hard and fast rules, but that's pretty much the way it works.

I asked Sharon Ermel Spadaccini, who sells real estate from Berkshire Hathaway Home Services Fox & Roach Realtors' New Hope office, whether she has had any problems with closings since the rules took effect.

"If you have been in the business a long time, you've already learned how to deal with these kinds of new situations," Spadaccini said.

Chris Artur, who owns Artur Realty in the city's Mayfair neighborhood, was among the first area real estate agents to sound the alarm about the potential effects of the rule changes.

"I'm experiencing it on the processing end right now on a couple of deals," he said in January, anticipating the result would be "delays in closing."

Artur said he thought that "Realtors are being kept in the dark in the processing of these loans, which makes it difficult to give updated customer service to the buyer, the seller, or the cooperating agent."

John Duffy, president of Duffy Real Estate on the Main Line, said he had experienced no delays yet, "but it has been a big adjustment for all facets of the business."

"Bottom line is that the new regulations serve very little, if any, purpose in helping the consumer, but try telling that to the bureaucrats," he said.

Having waded through eight years of the foreclosure crisis, I certainly understand the need for such safeguards.

The issue here, however, is that, as with most new things, the rule-makers assume those whom the rules affect will understand and comply.

Ignorance of the law is no excuse, of course. When you are making what is likely the biggest purchase of your life, gaining as much knowledge of the process as you can is a good thing.

aheavens@phillynews.com

215-854-2472 @alheavens