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After going on a tear for most of 2008, resale home purchase activity slowed significantly in November. The number of closed sales was down 23 percent from October.

The accompanying graph shows that over the past couple of years, it has not been a normal seasonal pattern for sales to slow so rapidly between October and November. Sales were still up 40 percent from a year prior — but that compares to an 89 percent year-over-year increase in the prior month.

Inventory for sale declined again, ending down 22 percent from a year prior. This hasn’t been a very meaningful indicator for a while, however, as inventory has declined steadily even as prices plunged. The fact is that much of the inventory that is selling consists of foreclosures or other types of “must-sell” housing. For as long as that continues to be the case, marginal changes in inventory levels probably won’t make much difference.

There were 6.9 months’ worth of inventory for sale, up from 5.5 months last month but down from 8.0 months a year prior.

I think it’s plausible to assume that the dropoff in sales activity could be due to increased caution in the wake of the recent widespread job loss and general financial market shellacking. People are less likely to buy homes if they think they might lose their jobs, and watching their other investments plummet in value can’t be helping either. If potential buyers started to get spooked in October, which is when things got really ugly in the markets, that would just be starting to show up in the number of closed November sales.

If this is what’s going on, sales activity could moderate for a while — barring heavy-duty government intervention, of course.

On that note, Dean Calbreath over at the UT has good overview of our fearless leaders’ new scheme to prop up the housing market by forcing mortgage rates down to 4.5 percent. Dean quotes me in the article, but don’t hold that against him.

— RICH TOSCANO

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