Existing Home Sales Fall For 2nd Month In A Row In October, Prices Up As Inventory Stays Tight
The annual pace of existing home sales (single-family, townhomes, condos and co-ops) fell 3.2% to a seasonally adjusted annual rate of 5.12 million in October, down from 5.29 million in September. Still, that’s 6% higher than the pace in October 2012–and activity has remained higher than year-ago levels for 28 months now. However, the data indicates that existing home purchases are flattening out.
“The erosion in buying power is dampening home sales,” said Lawrence Yun, chief economist with the NAR. “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.”
Nationally, the median existing-home price was $199,500 in October, up 12.8% year-over-year. That’s the 11th straight month of double-digit year-over-year increases. Distressed homes were 14% of October’s sales (foreclosures 9%, short sales 5%), same as in September. One year earlier, foreclosures comprised 25% of sales.
All this underscores the bottom line: inventory continues to be tight. Total TOT -0.35% inventory at the end of October dropped by 1.8% to 2.13 million existing homes available for sale. That’s about a 5-month supply (a 6-month supply is considered a healthy market).
The markets with the tightest inventory right now, according to data from realtor.com, are almost all in California: Oakland homes remain on the market an average of only 30 days; and in San Francisco, San Jose, Stockton-Lodi, and Denver, Colorado, homes average only 48 days on the market.
The drop in home sales can also be blamed in part on the 16-day government shutdown, which caused delays in the IRS providing tax transcripts needed for approval of mortgage loans. Mortgage rates (30-year conventional fixed-rate) have dropped since their 4.46% level in September, to 4.19% in October. That’s still higher than October 2012, when the average rate was 3.38%.
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.”
First-time buyers accounted for 28% of October purchases, same as in September, but lower than October 2012′s 31%.
All-cash investors continue to be a good chunk of the market: all-cash sales comprised 31% of transactions in October, down from 33% in September, though still up from 29% in October 2012. Individual investors bought 19% of homes in October (as in September) and were 20% in October 2012. Last month, two-thirds of investors paid cash.