Slight improvement in housing
Existing home sales rose 1.4 percent in October over September and are up 13.5 percent from October 2010, according to the National Association of Realtors (NAR), noting also that the inventory levels in America continued to decline, falling 2.2 percent in October down to 3.33 million existing homes available for sale (an 8.0 month supply, down from an 8.3 month supply in September). Inventories have been falling slightly since the bubble bust around July 2008 which set a record of 4.58 million homes for sale.
NAR Chief Economist, Dr. Lawrence Yun said, “Home sales have been stuck in a narrow range despite several improving factors that generally lead to higher home sales such as job creation, rising rents and high affordability conditions. Many people who are attempting to buy homes are thwarted in the process.”
Why weren’t sales higher?
“A higher rate of contract failures has held back a sales recovery,” Yun added. “Contract failures reported by NAR members jumped to 33 percent in October from 18 percent in September, and were only 8 percent a year ago, so we should be seeing stronger sales.” NAR reports that contract failures typically come in the form of declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including home inspections and employment losses.
“Other recent factors include disruption in the National Flood Insurance Program, and lower loan limits for conventional mortgages, which paradoxically force some of the most creditworthy consumers to pay unnecessarily higher interest rates,” Yun said.
Median home prices and sale types
Nationally, the median home price for existing homes was $162,500 in October, down 4.7 percent from October 2010. NAR reports that distressed homes dropped from accounting for 34 percent of all sales in October 2010 and 30 percent in September to only 28 percent in October. Cash sales dropped one percent to 29 percent in October and are back to October 2010 levels and investors purchased 18 percent of all homes sold in October, also down one percent. First time buyers accounted for 34 percent of sales, up two percent for the month.
“In some areas we’re hearing about shortages of foreclosure inventory in the lower price ranges with multiple bidding on the more desirable properties,” Yun said. “Realtors® in such areas are calling for a faster process of getting foreclosure inventory into the market because they have ready buyers. In addition, extending credit to responsible investors would help to absorb inventory at an even faster pace, which would go a long way toward restoring market balance.”
Regional performances vary
Existing home sales in the…
- …Midwest rose 2.8 percent for the month, and are up 19.6 percent year over year.
- …Northeast fell 5.1 percent for the month, but are up 1.4 percent year over year.
- …South rose 2.1 percent for the month, but are up 14.1 percent year over year.
- …West rose 4.4 percent for the month, but are up 15.5 percent year over year.
- The median price in the Midwest was $132,800, down 4.7 percent year over year.
- The median price in the Northeast was $224,400, down 5.5 percent year over year.
- The median price in the South was $145,700, down 1.6 percent year over year.
- The median price in the West was $207,500, down 1.6 percent year over year.