September Existing Homes

The pace of existing home sales fell in September according to the National Association of Realtors (NAR). The downtick was 1.9 percent to an annualized number of 529,000 units. This contraction followed the July and revised August (originally 549,000) tallies of 539,000 which were the highest since November 2009.

The year-over-year figure is still strong, so the one month slip is hardly enough to cause alarm. To put it into perspective, June 2011 was the last month with a negative year-over-year tally. September’s twelve month look back puts the growth rate at 10.7 percent; the fifth double digit increase in a row.

Interest rates may have put some pressure on the month’s sales. According to Freddie Mac, the national commitment rate for a 30-year, conventional, fixed rate mortgage increased slightly to 4.49 percent from 4.46 percent in August. The last time this benchmark rate was higher was July 2011 when it was 4.55 percent. A year ago, this bellwether rate was 3.47 percent, so there has definitely been upward pressure on borrowing costs recently.

Cost measures suffered in the period but inventories were stable. The median price of an existing home fell $10,500 to $199,200, falling for the third consecutive month. The average home price also fell for the third month in a row; the mean is now $247,400 versus $256,600 in August. Both measures are up on a year-over-year basis with the median and average gaining 11.7 percent and 9.2 percent respectively. At the current pace of sales, there are roughly five months of inventory for sale. This is a modest uptick from 4.9 months in August.

To say the paint is falling off of the existing housing market would be an exercise in hyperbole. However, the last few months of data from the NAR feels like the pace of this portion of the economy is diminishing. Perhaps this market is suffering from the effects of government and central bank uncertainty. With congress back at work for a few more months, these doubts have not been removed. (by C. Cox)