Existing Home Sales Rise in October, Market Stabilizing
November 28, 2006
Sales of existing homes held steady with a modest gain last month, another indicator that the housing market is transitioning into a more normal market in contrast with unsustainable activity last year, according to the National Association of Realtors®.
Total existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 0.5 percent to a seasonally adjusted annual rate1 of 6.24 million units in October from an upwardly revised pace of 6.21 million in September, but were 11.5 percent below the 7.05 million-unit level in October 2005.
David Lereah, NAR’s chief economist, said market fundamentals are improving. “The present level of home sales demonstrates some confidence in the market, but sales are lower than sustainable due to psychological factors,” he said. “The demographics of our growing population, historically low and declining mortgage interest rates, and healthy job creation mean the wherewithal is there to buy homes in most of the country, but many buyers remain on the sidelines. After a period of price adjustment, we’ll see more confidence in the market and a lift to home sales should be apparent in the first quarter of 2007.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.36 percent in October, down from 6.40 percent in September; the rate was 6.07 percent in October 2005. Last week, Freddie Mac reported the 30-year rate dropped to 6.18 percent – the lowest since January of this year.
NAR President Pat Vredevoogd Combs, from Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt, said sellers in most of the country are doing what it takes to attract buyers. “With the exception of parts of the West, sellers are cutting their price enough to encourage sales,” said Combs. “It’s an especially good market for sellers in areas with rising jobs and a growing population where prices remain moderate – those are the areas now with the strongest price growth. On the opposite extremes, about 10 percent of the country is experiencing economic weakness, and a fourth of the nation – areas that had the biggest boom – is in a correction that will take longer to balance. All of that is working to the advantage of buyers in today’s market.”
The national median existing-home price2 for all housing types was $221,000 in October, which is 3.5 percent below October 2005 when the median price spiked above adjacent months to $229,000. The median is a typical market price where half of the homes sold for more and half sold for less.
“The annual decline in the October median home price is skewed because there was an uncharacteristic spike in October 2005, but the trend for the fourth quarter will be prices remaining slightly below a year ago. Overall prices are projected to see modest appreciation around early spring,” Lereah said.
Total housing inventory levels increased 1.9 percent at the end of October to 3.85 million existing homes available for sale, which represents a 7.4-month supply at the current sales pace.
Single-family home sales rose 1.3 percent to a seasonally adjusted annual rate of 5.50 million in October from a level of 5.43 million September, but were 11.0 percent below the 6.18 million-unit pace in October 2005. The median existing single-family home price was $221,300 in October, which is 3.4 percent below a year ago.
Existing condominium and cooperative housing sales fell 4.8 percent to a seasonally adjusted annual rate of 741,000 units in October from an upwardly revised 778,000 in September, and were 14.5 percent lower than the 867,000-unit level in October 2005. The median existing condo price3 was $214,300 in October, which is 5.3 percent lower than a year earlier.
Regionally, existing-home sales in the West rose 6.4 percent to an annual pace of 1.33 million in October but were 18.9 percent lower than a year earlier. The median price in the West was $340,000, down 0.6 percent from October 2005.
Existing-home sales in the Midwest were unchanged in October, holding at a level of 1.41 million, and were 10.2 percent lower than a year ago. The median price in the Midwest was $170,000, which is 1.2 percent below October 2005.
Existing-home sales in the South slipped 1.2 percent to an annual sales rate of 2.49 million in October, and were 8.8 percent below a year ago. The median price in the South was $185,000, down 7.0 percent from a spike in October 2005.
Existing-home sales in the Northeast declined 2.9 percent to a level of 1.01 million in October, and were 9.8 percent below October 2005. The median existing-home price in the Northeast was $254,000, down 5.2 percent from a year earlier.
Source: The National Association of Realtors