October Existing-Home Sales Cool but Low Inventory Drives Prices
Existing-home sales declined for the second consecutive month in October, while constrained inventory means home prices continue to see double-digit year-over-year gains, according to the National Association of Realtors®.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 3.2 percent to a seasonally adjusted annual rate of 5.12 million in October from 5.29 million in September, but are 6.0 percent higher than the 4.83 million-unit level in October 2012. Sales have remained above year-ago levels for the past 28 months.
Lawrence Yun, NAR chief economist, said a flattening trend is expected. “The erosion in buying power is dampening home sales,” he said. “Moreover, low inventory is holding back sales while at the same time pushing up home prices in most of the country. More new home construction is needed to help relieve the inventory pressure and moderate price gains.”
The national median existing-home price2 for all housing types was $199,500 in October, up 12.8 percent from October 2012, which is the 11th consecutive month of double-digit year-over-year increases.
Distressed homes3 – foreclosures and short sales – accounted for 14 percent of October sales, unchanged from September; they were 25 percent in October 2012. Part of the gain in median price is from a smaller share of distressed sales.
Nine percent of October sales were foreclosures, and 5 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in October, while short sales were discounted 14 percent.
Total housing inventory at the end of October declined 1.8 percent to 2.13 million existing homes available for sale, which represents a 5.0-month supply4 at the current sales pace; the relative supply was 4.9 months in September. Unsold inventory is 0.9 percent above a year ago, when there was a 5.2-month supply.
The median time on market for all homes was 54 days in October, up from 50 days in September, but well below the 71 days on market in October 2012. Short sales were on the market for a median of 93 days, while foreclosures typically sold in 46 days, and non-distressed homes took 53 days. Thirty-six percent of homes sold in October were on the market for less than a month.
Data from realtor.com,5 NAR’s listing site, show the tightest inventory conditions, reported as median age of inventory, are in Oakland, Calif., 30 days; and four markets at 48 days each: San Francisco; San Jose, Calif.; Denver and Stockton-Lodi, Calif.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.19 percent in October from 4.46 percent in September; the rate was 3.38 percent in October 2012.
NAR President Steve Brown, co-owner of Irongate, Inc., Realtors® in Dayton, Ohio, said credit remains unnecessarily restrictive. “Although mortgage interest rates are still historically affordable, some financially qualified buyers are being denied a loan,” he said. “The risk-averse nature of lending also is impacting small builders who are unable to get construction loans, even when they see strong local demand. We simply have to reverse the pendulum swing back toward the middle to give more creditworthy borrowers access to safe and sound financing.”
Timing is a factor as lenders brace for the imminent implementation of the Qualified Mortgage rules that will require a lot more time, documentation and scrutiny to process loans.
First-time buyers accounted for 28 percent of purchases in October, unchanged from September, but down from 31 percent in October 2012.
All-cash sales comprised 31 percent of transactions in October, down from 33 percent in September; they were 29 percent in October 2012. Individual investors, who account for many cash sales, purchased 19 percent of homes in October, unchanged from September; they were 20 percent in October 2012. Last month, two-thirds of investors paid cash.
Single-family home sales fell 4.1 percent to a seasonally adjusted annual rate of 4.49 million in October from 4.68 million in September, but are 5.2 percent above the 4.27 million-unit pace in October 2012. The median existing single-family home price was $199,500 in October, up 12.7 percent from a year ago.
Existing condominium and co-op sales rose 3.3 percent to an annual rate of 630,000 units in October from 610,000 in September, and are 12.5 percent above the 560,000-unit level a year ago. The median existing condo price was $199,200 in October, which is 13.1 percent above October 2012.
Regionally, existing-home sales in the Northeast declined 2.9 percent to an annual rate of 670,000 in October, but are 11.7 percent higher than October 2012. The median price in the Northeast was $247,300, up 7.4 percent from a year ago.
Existing-home sales in the Midwest slipped 1.6 percent in October to a pace of 1.22 million, but are 8.0 percent above a year ago. The median price in the Midwest was $154,700, which is 9.3 percent higher than October 2012.
In the South, existing-home sales declined 1.9 percent to an annual level of 2.06 million in October, but are 7.3 percent above October 2012. The median price in the South was $171,500, up 12.9 percent from a year ago.
With constrained inventory, existing-home sales in the West fell 7.1 percent to a pace of 1.17 million in October, and are 0.8 percent below a year ago. The median price in the West was $284,800, up 17.2 percent from October 2012.
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NOTE: For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.
1Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR rebenchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.
Existing-home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample – about 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.
2The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to a seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.
The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR’s quarterly metro area price reports.
3Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR’s Realtors® Confidence Index, posted at Realtor.org.
4Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).