Existing Home Sales Increase 1.4% in October
The inventory of existing homes on the market fell in October and the pace of home sales increased to a level 13.5% above what they were a year ago, according to a report released by the National Association of Realtors on Monday.
October sales rose 1.4% from the previous month, to a seasonally-adjusted annual pace of 4.97 million. At the current sales pace, there was an 8 month supply of homes on the market - down from an 8.3 month supply in September. Existing home sales data includes single-family homes, townhouses, condos, and co-ops.
But while recent sales have gained momentum, they have much room for improvement. And though real estate is highly affordable right now due to lower sales prices and record low mortgage rates (4.07% in October for a 30 year fixed rate conventional loan with a 20% down payment), many would-be buyers are just not able to follow through with their plans of home ownership.
NAR’s chief economist 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.“
Yun said that a high rate of contract failures has held back a sales recovery. Contract failures are cancellations of a purchase contract due to reasons such as declined mortgage applications, appraised home values coming in lower than the negotiated sales price, or other problems including home inspections and employment losses.
“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 added.
“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.
NAR PresidentMoe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said consumers can increase their odds of obtaining a mortgage by being aware of how credit scores are determined. “If you want to get a mortgage, don’t buy a car or take on new installment debt or credit cards,” he said.
Veissi also reminded consumers to pay all their bills on time, keep old credit accounts active, and keep credit balances below 30% of their credit limits.
The national median sales price was $161,600 in October, which is 5.8% the median price a year ago. Distress sales continue to put downward pressure on the median home price.
By region, the West showed the most improvement in October - existing home sales rose 4.4% to a level 15.5% higher than they were a year ago. The median sales price in this region was $207,500 - 1.6% lower than in October 2010.
In the Midwest, existing home sales rose 2.8% in October to a pace 19.6% higher than the same month the year before. The median home price of $132,800 was 4.7% lower than it was a year ago.
Existing home sales in the South rose 2.1% in October to a level 14.1% higher than it was in October 2010. The median home price in the South was $145,700, a decline of 1.6% from the same month last year.
The Northeast was the only region to experience a decline in home sales for October, falling 5.1% from the previous month. The pace of sales increased 1.4% from October 2010 and the median sales price of $224,400 was down 5.5% from a year ago.
National Association of Realtors