Remember the stock market panics and credit market shocks back in mid and late October -- and the dramatic dropoff in consumer spending and confidence that followed?

They had their predictable impacts on home buying: Sales hit the skids.

According to the National Association of Realtors, sales in November plunged by 8.6 percent from October on a seasonally-adjusted basis to a 4.49 million annualized rate. For much of the prior six months, sales had been relatively stable -- hovering in a narrow band of 4.9 million to 5.1 million.

The November decline was sharpest in the Northeast -- down 12 percent. In the Midwest, sales dropped by 7.4 percent, and 10.9 percent in the South. The Western region saw the least impact -- down by 4.3 percent.

Realtors chief economist Lawrence Yun blamed the drops on what he called “deteriorating conditions” on Wall Street and the jobs market in October and November.

Despite the overall national decline, Yun said, home sales were still up in some local areas in California, Florida, Nevada and Arizona, where foreclosures and REO sales dominate market transactions and have pushed prices down to rock-bottom levels.

Now, just in case you're feeling a little discouraged by November's numbers, keep this in mind: The outlook for the coming months is a whole lot more positive.

Since the late October and November scares, mortgage rates have come down more than a percentage point and are now close to 50 year lows. We saw some 30-year fixed-rate mortgage quotes at four and three quarters percent last week, and most markets averaged around 5 percent.

Also on the plus side, the economic forecasters at one of the country's top banks issued a relatively upbeat set of projections for 2009 last week.

Wells Fargo's senior economists and investment strategists said they predict the current recession to end -- and turn around -- during the second half of the new year.

Jim Paulsen, chief investment strategist at Wells Capital Markets, blamed part of the current negative consumer psychology on excessive “fear mongering” about the economy at the Treasury department, which he said has basically scared the public and sent investors to the sidelines.

Wells Fargo's senior economist, Scott Anderson, said pent-up demand in housing and low interest rates will lead the country out of recession once consumer confidence turns around -- something that's already underway.

The number one “bright note”, he said “is that (housing) is about to turn the corner and will start to lead us out” of the current morass, perhaps as soon as early summer.

Published: December 30, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.