October Existing Homes Sales

The sale of existing homes expanded in October according to the National Association of Realtors.  The 1.4 percent improvement was a welcome change from September’s contraction of 3 percent.  The annualized rate of sales for the month was 4.97 million which is up 60,000 unit month-over-month.

The additional sales did not happen without consequence.  The median price for a home was down 2 percent to $162,500.  Year-over-year it has lost 4.2 percent.  The housing depreciation may be picking up steam as the year-over-year comparison was only down 1.6 percent and 3.4 percent in August and September respectively.  The average home price fell 2.5 percent in October and has lost 4.6 percent vs. last year.  Another beneath the headline issue the existing housing market faces is contract failures.  October failures shot up to 33 percent from 18 percent in September.  Failures are contracts that are not completed due to a variety of circumstances like mortgage applications being declined or appraisal values being too low for a bank to justify completing the loan.  While mortgages continue to be more difficult to obtain than in the housing boom, interest rates set another record low.  According to Freddie Mac, the national average commitment rate for a 30-year conventional, fixed rate mortgage fell to 4.01 from 4.11 in September.

Along with rates, the silver lining for the existing home market is that the inventory is slowly normalizing.  There are currently 3.33 million homes for sale which represents a 2 percent monthly decline.  Based on the number of homes being sold, the country now has an 8.0 month supply.  This is getting closer to the six month supply Atlas considers normal.  Of course, it may take additional price concessions by the sellers in order to move enough homes and bring the stock of houses down to the preferred level.    (by Christopher Cox)