Existing Home Sales Increase Slightly But Median Prices Decline

Reports on the sales of existing homes for October were released on November 28 by the National Association of Realtors. On a slightly optimistic note, sales were up one-half percent to a seasonally adjusted annual rate of 6.24 million units compared to the upwardly revised figure of 6.21 million in September but were off dramatically - 11.5 percent - from the 7.05 million-unit annualized pace in October 2005.

NAR, in a press release, said that this modest gain from September to October was another indicator that the housing market "is transitioning into a more normal market in contrast with unsustainable activity last year."

David Lehreah, NAR's chief economist said market fundamentals are improving. "The present level of home sales demonstrates some confidence in the market, but sales are lower than sustainable due to psychological factors. The demographics of our growing population, historically low and declining mortgage interest rates, and healthy job creation mean the wherewithal is there to buy homes in most of the country, but many buyers remain on the sidelines. After a period of price adjustment, we'll see more confidence in the market and a lift to home sales should be apparent in the first quarter of 2007."

Not to be a wet blanket, but as reported here last week, in the third quarter of 2006 existing homes sold at a seasonally adjusted annual rate of 6.27 million units, down 12.7 percent from the 7.18 million pace during the same period in 2005. The new October figures may be an improvement over September but they are.03 million below the average pace for September and the two previous months.

The national median existing-home price for all housing types was $221,000 in October, which is 3.5 percent below October 2005 when the median price spiked above adjacent months to $229,000. Lehreah was quick to discount the big year-over-year drop saying that an "uncharacteristic spike" during October 2005 skewed current figures. "The trend for the fourth quarter will be prices remaining slightly below a year ago. Overall prices are projected to see modest appreciation around early spring."

The median price in September 2006 was reported earlier at $220,000 so October is a slight short-term improvement.

Total housing inventory levels increased 1.9 percent at the end of October to 3.85 million existing homes available for sale, which represents a 7.4-month supply at the current sales pace.

Single-family statistics for October were very close to overall figures: sales rose 1.3 percent to a seasonally adjusted annual rate of 5.50 million from 5.43 million September and the median existing single-family home price was $221,300, 3.4 percent below a year ago.

Existing condominium and cooperative housing were hit a little harder: sales fell 4.8 percent to a seasonally adjusted annual rate of 741,000 units in October from a revised September figure of 778,000 and were 14.5 percent lower than October 2005. The median existing condo price was $214,300 in October, 5.3 percent lower than a year earlier.