Stronger Home Sales will Require More Construction and Looser Credit – NAR

Low inventories continue to drive homernprices up from year-ago levels, but existing home sales appear to have at leastrntemporarily cooled the National Association of Realtors® (NAR) said today.  Sales of existing single-family homes,rncondominiums, and co-ops were down in October for the second month in a row, decreasingrn3.2 percent to a seasonally adjusted annual rate of 5.12 million units from 5.29rnmillion in September.  Sales however werernstill 6.0 percent higher than in October 2012 when the annualized rate was 4.83rnmillion.  NAR said that sales havernexceeded their year-ago levels for the past 28 months. </p

Single-familyrnhome sales fell 4.1 percent to a seasonally adjusted annual rate of 4.49rnmillion in October from 4.68 million in September, remaining 5.2 percent abovernthe 4.27 million-unit pace in October 2012. rnExisting condominium and co-op sales rose 3.3 percent to an annual raternof 630,000 units in October from 610,000 in September, and are 12.5 percentrnabove the 560,000-unit level a year ago.</p

Thernavailable housing inventory was down again in October, declining 1.8 percent torn2.13 million existing homes for sale.  Atrnthe current rate of sales this represents a 5.0 month supply compared to a relativernsupply of 4.9 months in September and 5.2 months in October 2012.</p

Lawrence Yun, NAR chief economist, said a flattening trend in sales isrnexpected. “The erosion in buying power is dampening home sales,” he said.rn”Moreover, low inventory is holding back sales while at the same time pushingrnup home prices in most of the country. More new home construction is needed tornhelp relieve the inventory pressure and moderate price gains.”</p

Nationally home prices rose on anrnannual basis by double digits for the 11^th straight month, rising byrn12.8 percent from October 2012 to a current median of $199,500.  The median price of an existing single-familyrnhome price was also $199,500 in October, up 12.7 percent from a year ago.  The median condo price was $199,200, a 13.1rnpercent annual jump.</p

Nine percent of sales in Octoberrnwere foreclosures and 5 percent were short sales with aggregate distressed homernsales unchanged from the 14 percent market share in September.  These properties accounted for 25 percent ofrnall existing home sales in October 2012. rnForeclosures sold at an average discount of 17 percent and short salesrn14 percent.  NAR said part of the gain inrnthe median price is from the smaller share of discounted distressed sales.</p

First-time buyers accounted for 28rnpercent of purchases in October, unchanged from September, but down from 31rnpercent in October 2012 while investors purchased 19 percent, essentially unchangedrnboth month-over-month and year-over-year. rnTwo-thirds of investors paid cash for their purchases and accounted forrnmany of the 29 percent of October home sales that were all cash. </p

Median marketing time rose slightly inrnOctober, from 50 days to 54, but remains well below the median of 71 days onernyear earlier.  Short sales took a medianrnof 93 days to sell while foreclosures took 46 days and market rate sales 53.  Thirty-six percent of homes sold in Octoberrnwere on the market for less than a month.</p

Existing-home sales in the Northeastrndeclined 2.9 percent to an annual rate of 670,000 in October, but are 11.7 percentrnhigher than October 2012. The median price in the Northeast was $247,300, uprn7.4 percent from a year ago.</p

Sales in the Midwest slipped 1.6rnpercent in October to a pace of 1.22 million, but are 8.0 percent above a yearrnago. The median price in the Midwest was $154,700, which is 9.3 percent higherrnthan October 2012.</p

In the South, existing-home salesrndeclined 1.9 percent to an annual level of 2.06 million in October, but are 7.3rnpercent above October 2012. The median price in the South was $171,500, up 12.9rnpercent from a year ago.</p

With constrained inventory,rnexisting-home sales in the West fell 7.1 percent to a pace of 1.17 million inrnOctober, and are 0.8 percent below a year ago. The median price in the West wasrn$284,800, up 17.2 percent from October 2012.</p

NAR President Steve Brown saidrncredit remains unnecessarily restrictive. “Although mortgage interest rates arernstill historically affordable, some financially qualified buyers are beingrndenied a loan,” he said. “The risk-averse nature of lending also is impactingrnsmall builders who are unable to get construction loans, even when they seernstrong local demand. We simply have to reverse the pendulum swing back towardrnthe middle to give more creditworthy borrowers access to safe and soundrnfinancing.”

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