|Brian Allabastro November 2011|
Existing residential property sales in the United States improved in October while the number of homes on the market continued to decline, according to the latest data from the National Association of Realtors.
Total sales of completed transactions that include single family, townhomes, condominiums and co-ops, rose 1.4% to a seasonally adjusted annual rate of 4.97 million in October from a downwardly revised 4.90 million in September, and are 13.5% above the 4.38 million unit level in October 2010.
Lawrence Yun, NAR chief economist, said the market has been fairly steady but at a lower than desired level. ‘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,’ he said.
A higher rate of contract failures has held back a sales recovery. Contract failures reported by NAR members jumped to 33% in October from 18% in September, and were only 8% a year ago, so we should be seeing stronger sales, Yun pointed out.
Contract failures are cancellations caused by 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, according to Yun.
An ongoing positive trend is a steady decline in the number of homes on the market. Total housing inventory at the end of October fell 2.2% to 3.33 million existing homes available for sale, which represents an eight month supply at the current sales pace, down from an 8.3 month supply in September. Inventories have been trending gradually down since setting a record of 4.58 million in July 2008.
The national median existing home price for all housing types was $162,500 in October, which is 4.7% below October 2010. Distressed homes, that is foreclosures and short sales typically sold at deep discounts, slipped to 28% of sales in October from 30% in September and 34% a year ago.
‘In some areas we’re hearing about shortages of foreclosure inventory in the lower price ranges with multiple bidding on the more desirable properties. 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,’ explained Yun.
All cash sales accounted for 29% of purchases in October, little changed from 30% in September and 29% in October 2010 with investors making up the bulk of cash transactions.
Investors purchased 18% of homes in October, compared with 19% in September and 19% in October 2010. First time buyers accounted for 34% of transactions in October, up from 32% in September and 32% in October 2010.
The median existing single family home price was $161,600 in October, which is 5.8% below October 2010 while the median existing condo price was $160,300 in October, down 1.5% from a year ago.
Regionally, existing home sales in the Northeast fell 5.1% to an annual level of 750,000 in October but are 1.4% above October 2010. The median price in the Northeast was $224,400, down 5.5% from a year ago.
Existing home sales in the Midwest rose 2.8% in October to a pace of 1.10 million and are 19.6% higher than October 2010. The median price in the Midwest was $132,800, which is 4.7% below a year ago.
In the South, existing home sales increased 2.1% to an annual level of 1.94 million in October and are 14.1% above a year ago. The median price in the South was $145,700, down 1.6% from October 2010.
Existing home sales in the West rose 4.4% to an annual pace of 1.19 million in October and are 15.5% higher than October 2010. The median price in the West was $207,500, which is 1.6% below a year ago