Stronger Home Sales will Require More Construction and Looser Credit - NAR
Low inventories continue to drive home prices up from year-ago levels, but existing home sales appear to have at least temporarily cooled the National Association of Realtors® (NAR) said today. Sales of existing single-family homes, condominiums, and co-ops were down in October for the second month in a row, decreasing 3.2 percent to a seasonally adjusted annual rate of 5.12 million units from 5.29 million in September. Sales however were still 6.0 percent higher than in October 2012 when the annualized rate was 4.83 million. NAR said that sales have exceeded their year-ago levels for the past 28 months.
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, remaining 5.2 percent above the 4.27 million-unit pace in October 2012. 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 available housing inventory was down again in October, declining 1.8 percent to 2.13 million existing homes for sale. At the current rate of sales this represents a 5.0 month supply compared to a relative supply of 4.9 months in September and 5.2 months in October 2012.
Lawrence Yun, NAR chief economist, said a flattening trend in sales 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."
Nationally home prices rose on an annual basis by double digits for the 11th straight month, rising by 12.8 percent from October 2012 to a current median of $199,500. The median price of an existing single-family home price was also $199,500 in October, up 12.7 percent from a year ago. The median condo price was $199,200, a 13.1 percent annual jump.
Nine percent of sales in October were foreclosures and 5 percent were short sales with aggregate distressed home sales unchanged from the 14 percent market share in September. These properties accounted for 25 percent of all existing home sales in October 2012. Foreclosures sold at an average discount of 17 percent and short sales 14 percent. NAR said part of the gain in the median price is from the smaller share of discounted distressed sales.
First-time buyers accounted for 28 percent of purchases in October, unchanged from September, but down from 31 percent in October 2012 while investors purchased 19 percent, essentially unchanged both month-over-month and year-over-year. Two-thirds of investors paid cash for their purchases and accounted for many of the 29 percent of October home sales that were all cash.
Median marketing time rose slightly in October, from 50 days to 54, but remains well below the median of 71 days one year earlier. Short sales took a median of 93 days to sell while foreclosures took 46 days and market rate sales 53. Thirty-six percent of homes sold in October were on the market for less than a month.
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.
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.
NAR President Steve Brown 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."