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 (NAR).
NAR reports that total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 3.2% to a seasonally adjusted annual rate of 5.12 million in October, from 5.29 million in September, but are 6.0% higher than the 4.83 million-unit level in October 2012. Sales have remained above year-ago levels for the past 28 months, says NAR.
Lawrence Yun, NAR's chief economist, says a flattening trend is expected. ‘The erosion in buying power is dampening home sales,’ he explains. ‘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 price for all housing types was $199,500 in October – up 12.8% from October 2012 – and is the 11th consecutive month of double-digit year-over-year increases, according to NAR.
Distressed homes (foreclosures and short sales) accounted for 14% of October sales, unchanged from September; they were 25% in October 2012. Part of the gain in median price is from a smaller share of distressed sales, NAR reports. Nine percent of October sales were foreclosures, and 5% were short sales. Foreclosures sold for an average discount of 17% below market value in October, while short sales were discounted 14%, says NAR.
NAR also reports that total housing inventory at the end of October declined 1.8% to 2.13 million existing homes available for sale, which represents a five-month supply at the current sales pace; the relative supply was 4.9 months in September. Unsold inventory is 0.9% 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, according to NAR.
Steve Brown, president of NAR, says credit remains unnecessarily restrictive. ‘Although mortgage interest rates are still historically affordable, some financially qualified buyers are being denied a loan,’ he explains.
‘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 concludes.
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, says NAR.
NAR also reports the following statistics:
– First-time buyers accounted for 28% of purchases in October, unchanged from September, but down from 31% in October 2012.
– All-cash sales comprised 31% of transactions in October, down from 33% in September; they were 29% in October 2012. Individual investors, who account for many cash sales, purchased 19% of homes in October, unchanged from September; they were 20% in October 2012. Last month, two-thirds of investors paid cash.
– Single-family home sales fell 4.1% to a seasonally adjusted annual rate of 4.49 million in October from 4.68 million in September, but are 5.2% 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% from a year ago.
– Existing condominium and co-op sales rose 3.3% to an annual rate of 630,000 units in October from 610,000 in September, and are 12.5% above the 560,000-unit level a year ago. The median existing-condo price was $199,200 in October, which is 13.1% above October 2012's levels.
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