The sale of existing homes declined for the second straight month in October, hitting the lowest level since June, although tight inventories continue to hold prices at high levels, according to a report Wednesday from the National Association of Realtors.
Homes Sales Behind Rate Expected by Economists, Still Show Year-Over-Year Gains
Total existing home sales, which are comprised of completed transactions for single-family homes, townhouses, condominiums and co-ops, fell 3.2 percent to a seasonally adjusted 5.12 million annual rate. Economists expected a 5.14 million pace. In September, the rate stood at 5.29 million homes. Year-over-year, existing home sales were up 6 percent in October, marking the 28th consecutive month of gains compared to the year prior month.
Sales were buoyed by condominium and co-op sales during October, which rose 3.3 percent to an annual rate of 610,000. Sales of single-family homes, the largest component of existing home sales, fell by 4.1 percent to a seasonally adjusted rate of 4.49 million units from 4.68 million in September.
The national median price for completed contracts was $199,500 in October, unchanged from September and 12.8 percent higher than October 2012. It was the 11th straight month of double-digit price increases year-over-year.
Sales of distressed homes, comprised of foreclosures and short sales, accounted for 14 percent of all October sales, down from 25 percent in October last year. Foreclosures were sold at an average 17 percent discount below market value, while short sales went at a 14-percent discount.
Low Inventory Limiting New Sales
“The erosion in buying power is dampening home sales. 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,” said NAR chief economist Lawrence Yun in a statement today.
Total housing inventory at the end of October as compared to September 30, dropped 1.8 percent to 2.13 million existing homes available for sale, representing a 5.0-month supply at the current rate of sales. At the end of September, there was a 4.9-month supply.
The average time a house was on the market before being sold was 54 days in October, up 4 days from September. 36 percent of all homes were sold in less than one month. At the same time last year, the average time on the market for all homes was 71 days.
Lenders Not Helping
Steve Brown, president at NAR, said that banks are not helping matters with their tight rein on lending, denying qualified buyers loans. “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,” Brown said.
Brown echoes the sentiment of concern that the political wrangling in Washington is keeping banks on edge. Further caution stems from the Federal Reserve and when the central bank is going raise its key interest rate and start slowing its monthly purchases of bonds, known as QE3, which has been largely attributable to the constant rise in the stock market in 2013.
Wall Street isn’t paying much attention to the less-than-expected housing report. The Dow is ahead 14 points, the S&P 500 is up 4 points and the Nasdaq has climbed 14 points in morning action.
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