Home Sales Climb But Prices Decline
Sales of previously owned homes improved in October and are on pace to surpass last year’s anemic tally. But prices continued to fall, underscoring the broader market weaknesses.
The National Association of Realtors, which released its home-sales report Monday, said sales rose 1.4% in October from a month earlier and were running at a seasonally adjusted annual rate of 4.97 million units. That puts sales on track to beat last year’s level of 4.91 million units, which was the lowest level in 13 years.
While sales are improving, they remain weaker than some economists and housing analysts had anticipated, considering that 30-year mortgage rates in September and October fell below 4%, the lowest level in at least 60 years. Median prices, meanwhile, fell to $162,500 in October, down 4.7% from one year ago.
The trade group said an unusually high number of contract cancellations were partly to blame for holding back the housing recovery. One in three real-estate agents who responded to an NAR survey reported that a sale had fallen out of contract in October. Some contracts are falling through because appraisals come in too low and because wouldbe buyers aren’t qualifying for mortgages.
There were significant regional differences in the data. In October, sales of existing homes rose 2.8% in the Midwest, 2.1% in the south and 4.4% in the West. But sales declined 5.1% in the Northeast. Lawrence Yun, chief economist of the NAR, said an early snowstorm that took the region by surprise could be blamed for delaying some sales.
Nationally, sales were up by 12.3% from one year earlier, when sales had been depressed by the aftereffects of home-buyer tax credits. Sales dropped sharply in the summer after those tax credits expired. But while the country as a whole was up strongly from one year ago, sales were down by 4.1% in Washington, D.C., and by 0.8% in the New York metro area.
Mr. Yun said that lower loan limits for government-backed mortgages that took effect on Oct. 1 could have been behind some of the decline in the Northeast, where homes tend to be more expensive than in some other parts of the country. (Congress last week raised those limits back to their previous levels for mortgages eligible for backing by the Federal Housing Administration, but not for Fannie Mae and Freddie Mac.)
The number of homes listed for sale fell in October to 3.33 million, the lowest level of the year and down by 13.8% from one year ago.
While low inventories are often a sign of health because reduced competition can boost prices, many analysts believe the phenomenon reflects the inability or unwillingness of many homeowners to sell their properties.
Real-estate agents say more sellers are pulling their homes off the market rather than sell at today’s reduced prices. About one in four homeowners with a mortgage owes more than their home is worth.
A separate report from mortgage-data firm CoreLogic to be released Tuesday projected that it could take until 2020 for markets to fully digest an overhang of foreclosed properties that represent a “shadow” inventory of potential bank-owned homes.
CoreLogic estimates that there are 1.6 million single-family homes in some stage of default or foreclosure that will ultimately be taken back and resold by banks over the next 18 months. Assuming that homes are sold at roughly the same pace that has existed over the past two years, it would take until 2020 for the shadow inventory to decline to the level that prevailed prior to 2005, said Mark Fleming, CoreLogic’s chief economist.
“This is going to be a problem for a significant period of time,” Mr. Fleming said. But the “silver lining” is that stretching out the sale of bank-owned property over a longer time frame will do less damage to home prices. “If you were to push all of this inventory through the foreclosure process quickly, the housing market as it stands today would not be able to handle it,” he said.