WASHINGTON (November 23, 2010)—Existing-home sales retreated in October on the heels of two strong monthly gains, according to the National Association of Realtors®.
Existing-home sales declined 2.2% to a seasonally adjusted annual rate of 4.43 million in October from 4.53 million in September, and are 25.9% below 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.
Year-to-date there were 4.149 million existing-home sales, down 2.9% from 4.272 million at this time in 2009.
The recent sales pattern can be expected to continue, said NAR Chief Economist Lawrence Yun. “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. Still, sales activity is clearly off the bottom and is attempting to settle into normal sustainable levels,” he said. “Based on current and improving job market conditions, and from attractive affordability conditions, sales should steadily improve to healthier levels of above 5 million by spring of next year.”
Home prices steady
The national median existing-home price for all housing types was $170,500 in October, down 0.9% from October 2009. Distressed homes (short sales, foreclosures) accounted for 34% of sales in October, compared with 35% in September and 30% of sales in October 2009.
Several factors are restraining a housing recovery, even with great affordability conditions, said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “We’ll likely see some impact from the foreclosure moratorium in the months ahead, but overly tight credit is making it difficult for some creditworthy borrowers to qualify for a mortgage, and we are continuing to deal with a notable share of appraisals coming in below a price negotiated between a buyer and seller,” he said.
“A return to common sense loan underwriting standards would go a long way toward achieving responsible, sustainable home ownership. In addition, all home valuations should be made by competent professionals with local expertise and full access to market data—there remains an elevated level of appraisals that fail to provide accurate valuation, which is causing a steady level of sales to be cancelled or postponed,” Phipps said.
Delayed home sale closings
A parallel NAR practitioner survey shows 10% of Realtors® in October report they had a contract cancelled as a result of a low appraisal, and 13% report they had a contract delayed; 16% said a contract was negotiated to a lower sales price as a result of a low appraisal.
Home owners paying on time
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,” Yun said, “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.”
Home sale inventory
Total housing inventory at the end of October fell 3.4% to 3.86 million existing homes available for sale, which represents a 10.5-month supply at the current sales pace, down from a 10.6-month supply in September.
First-time buyers purchased 32% of homes in October, unchanged from September, but down from 50% a year ago during the initial surge for the first-time buyer tax credit. Investors accounted for 19% of transactions in October; they were 18% in September and 14% in October 2009; the balance of sales were to repeat buyers. All-cash sales were at 29% in October, unchanged from September but up from 20% a year ago.
Single-family home sales
Single-family home sales declined 2.0% to a seasonally adjusted annual rate of 3.89 million in October from 3.97 million in September, and are 25.6% 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% below a year ago.
Condo and co-op sales
Existing condominium and co-op sales fell 3.6% to a seasonally adjusted annual rate of 540,000 in October from 560,000 in September, and are 27.6% below the 746,000-unit sales rush a year ago. The median existing condo price was $166,000 in October, down 4.2% from October 2009.
Northeast home prices up
Regionally, existing-home sales in the Northeast declined 1.3% to an annual pace of 750,000 in October and are 27.2% below the surge in October 2009. The median price in the Northeast was $240,200, which is 1.9% higher than a year ago.
Midwest home prices down a bit
Existing-home sales in the Midwest slipped 1.1% in October to a level of 940,000 and are 32.4% below the tax credit rush one year ago. The median price in the Midwest was $139,500, down 3.6% from October 2009.
Southern home prices steady
In the South, existing-home sales fell 3.4% to an annual pace of 1.71 million in October and are 24.0% below the year-ago surge. The median price in the South was $148,700, down 0.7% from October 2009.
Western home prices down slightly
Existing-home sales in the West declined 1.9% to an annual level of 1.03 million in October and are 21.4% below the sales rush in October 2009. The median price in the West was $209,300, which is 4.8% below a year ago.