Existing Home Sales Slow In October

A third straight month of increasing home sales would have given economists reason to believe a housing market recovery is on its way. Unfortunately, October's sales figures spoiled those hopes.

After two months of encouraging gains, sales of existing homes fell 2.2 percent to a seasonally adjusted annual rate of 4.43 million in October from 4.53 million in September. That's down 25.9 percent from the 5.98 million-unit level in October 2009 when sales were surging prior to the initial deadline for the first-time buyer tax credit.

The biggest decline in sales occurred in the south. So far this year there have been 4.149 million existing-home sales, which is down 2.9 percent from this in 2009. Demand for homes has yet to materialize and the National Association of Realtors, which issued the record, partly blames the recent foreclosure mess.

"The housing market is experiencing an uneven recovery, and a temporary foreclosure stoppage in some states is likely to have held back a number of completed sales," said Lawrence Yun, NAR chief economist. "Still, sales activity is clearly off the bottom and is attempting to settle into normal sustainable levels."

Yun says if the job market improves, sales should start to rebound, with buyers attracted by low prices and low interest rates. According to Freddie Mac, the national average rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.23 percent in October from 4.35 percent in September; the rate was 4.95 percent in October 2009.

Home prices down nearly a point

The national median existing-home price for all housing types was $170,500 in October, down 0.9 percent from October 2009. Distressed homes accounted for 34 percent of sales in October, compared with 35 percent in September and 30 percent of sales in October 2009.

Falling home values may be hurting some markets more than others. In a separate survey, 10 percent of Realtors questioned in October reported they had a contract cancelled as a result of a low appraisal, and 13 percent report they had a contract delayed; 16 percent said a contract was negotiated to a lower sales price as a result of a low appraisal.

There is some good news about the more recent sales. According to FHFA, Fannie- and Freddie-backed mortgages that were recently originated show an outstanding performance, even better than during the pre-housing bubble years.

"A review of recently originated loans suggests that they have overly stringent underwriting standards, with only the highest creditworthy borrowers able to tap into historically low mortgage interest rates. There could be an upside surprise to sales activity if credit availability is opened to more qualified home buyers who are willing to stay well within budget," Yun said.

First-time buyers less active

First-time buyers purchased 32 percent of homes in October, unchanged from September, but down from 50 percent a year ago during the initial surge for the first-time buyer tax credit. Investors accounted for 19 percent of transactions in October; they were 18 percent in September and 14 percent in October 2009; the balance of sales were to repeat buyers. All-cash sales were at 29 percent in October, unchanged from September but up from 20 percent a year ago.

Single-family home sales declined 2.0 percent to a seasonally adjusted annual rate of 3.89 million in October from 3.97 million in September, and are 25.6 percent below the 5.23 million surge in October 2009. The median existing single-family home price was $171,100 in October, which is 0.5 percent below a year ago.

Existing condominium and co-op sales fell 3.6 percent to a seasonally adjusted annual rate of 540,000 in October from 560,000 in September, and are 27.6 percent below the 746,000-unit sales rush a year ago. The median existing condo price⁵ was $166,000 in October, down 4.2 percent from October 2009.

Regionally, existing-home sales in the Northeast declined 1.3 percent to an annual pace of 750,000 in October and are 27.2 percent below the surge in October 2009. The median price in the Northeast was $240,200, which is 1.9 percent higher than a year ago.

Existing-home sales in the Midwest slipped 1.1 percent in October to a level of 940,000 and are 32.4 percent below the tax credit rush one year ago. The median price in the Midwest was $139,500, down 3.6 percent from October 2009.

In the South, existing-home sales fell 3.4 percent to an annual pace of 1.71 million in October and are 24.0 percent below the year-ago surge. The median price in the South was $148,700, down 0.7 percent from October 2009.