Sales of existing homes fell more than forecast in October as foreclosure moratoriums and a lack of credit disrupted the U.S. housing market.
Purchases decreased 2.2 percent to a 4.43 million annual rate from 4.53 million in September, the National Association of Realtors said today in Washington. Economists projected sales would decline to a 4.48 million pace, according to the median forecast in a Bloomberg News survey. The median price fell 0.9 percent from a year earlier.
An overhang of distressed properties and an unemployment rate hovering near 10 percent may restrain home sales, while concerns over faulty foreclosure proceedings threaten to further delay the mending process. At the same time, mortgage rates near record lows may help limit the damage.
“There are still going to be quite a bit of homes up for sales that have come from foreclosures,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York. “There is little improvement.”
Estimates of the 71 economists surveyed by Bloomberg ranged from 3.85 million to 4.7 million. In July, sales ran at a 3.84 million annual rate, the weakest in a decade’s worth of record-keeping by the Realtors group.
Another report today showed the U.S. economy grew at a 2.5 percent annual rate in the third quarter, more than previously calculated, as consumer spending and business investment grew. The revised increase in gross domestic product compares with a 2 percent estimate issued last month and a 1.7 percent rise in the second quarter, figures from the Commerce Department. Corporate profits grew last quarter at a slower pace and an increase in employee wages in the prior three months was almost twice as much as initially reported.
Stocks held earlier losses on mounting tensions between North Korea and South Korea, and concern grew Europe’s debt crisis will spread. The Standard & Poor’s 500 Index fell 1.2 percent to 1,183.04 at 10:18 a.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 2.74 percent from 2.80 percent late yesterday.
Compared with a year earlier, existing home sales were down 28 percent before adjusting for seasonal patterns.
Sales last month fell in all four regions, today’s report showed, led by a 3.4 percent drop in the South.
The median price decreased to $170,500 last month from $172,000 in October 2009.
Purchases of single-family homes fell 2 percent to a 3.89 million annual rate in October from a month earlier, the group said.
The number of previously owned homes on the market fell 3.4 percent to 3.86 million. At the current sales pace, it would take 10.5 months to sell those houses, compared with 10.6 months in September.
Month’s supply would need to drop to around eight months in order to stabilize home prices, the group has said in the past.
Distressed sales, which include foreclosures and short-sales in which the bank agrees to take less than the full amount of the mortgage, accounted for 34 percent of total sales, about the same as in prior months.
The drop in sales last month “may be partly due” to the temporary foreclosure moratoriums, NAR Chief Economist Lawrence Yun said in a press conference. A lack of mortgage lending is also preventing buyers from entering the market, offsetting any benefit from lower borrowing costs, Yun said.
The Fed’s second round of quantitative easing will probably be “not that meaningful” in pushing interest rates down much more, he said.
Foreclosure moratoria at JPMorgan Chase & Co. and other banks, along with government investigations into faulty paperwork, threaten to further delay a recovery as houses slated for repossession take longer to come to market.
Foreclosures are mounting as out-of-work Americans can’t meet monthly payments while growing numbers of homeowners, seeing their home prices slide to less than their mortgage values, also default.
Unemployment forecast to average 9.3 percent in 2011 is another reason why any recovery in housing may take years to evolve, even with mortgage rates near record lows.
Housing starts declined in October for a second consecutive month and were 77 percent below the three-decade peak of 2.27 million reached in January 2006.
D.R. Horton Inc., the second-largest U.S. homebuilder by revenue, expects 2011 to be “challenging” for the industry as consumer confidence and employment remain weak, Chief Executive Officer Donald Tomnitz said on a Nov. 12 earnings conference call. The spring selling season, the strongest for builders, may fail to bring the traditional boost in demand, he said.