Sales of U.S. Existing Homes Drop to Lowest in Four Months
Purchases of previously-owned U.S. homes fell in October to the lowest level in four months as limited supply and higher mortgage rates restrained momentum in the housing-market recovery.
Sales (ETSLTOTL) dropped 3.2 percent to a 5.12 million annual rate, the fewest since June, according to data released today by the National Association of Realtors in Washington. The median forecast of 76 economists surveyed by Bloomberg projected a 5.14 million pace. The partial federal shutdown last month may have delayed some closings, the group also said.
Concern that fiscal gridlock in Washington will damage the economy combined with the increase in borrowing costs amid expectations Federal Reserve policy makers will soon dial back monetary stimulus have slowed the rebound in housing. Sustained payroll gains would help repair confidence and enable more Americans to buy real estate.
“The housing data has downshifted in recent months, presumably because of the pop in mortgage rates beginning in the spring,” Thomas Simons, an economist at Jefferies LLC in New York, said in an e-mailed note. “Low inventories may also be impeding sales.”
Sales forecasts in the Bloomberg survey ranged from 4.9 million to 5.35 million. The September reading was unrevised at 5.29 million pace.
The median price of an existing property increased 12.8 percent in October from the year before to $199,500, today’s figures showed.
The jump in property values reflects a changing in the “mix” of sales toward higher-end properties, NAR Chief Economist Lawrence Yun said at a press conference as the figures were released. There is a very limited supply of houses priced at $100,000 or less, leading to a 16 percent drop in sales in that category over the past year, he said. In contrast, sales of homes costing $250,000 or more are up 20 percent to 30 percent over the same period, he said.
Purchases decreased in all four regions, led by a 7.1 percent slump in the West.
About 13 percent of real-estate agents polled said contract closing were delayed because the government shutdown held back income verification by the Internal Revenue Service and processing by the Federal Housing Administration, said Yun.
“Clearly, the affordability conditions are worsening,” Yun said. “Also, the lack of inventory” is hurting demand, particularly in the West, he said.
Yun said sales will probably remain subdued through the first quarter of 2014. They will pick up thereafter, spurred by gains in employment, he said.
There were 2.13 million existing homes for sale at the end of October, down from 2.17 million the month prior, the report said. Given the current turnover, it would take 5 months to sell those houses compared with 4.9 months at the end of September.
Inventory was up 0.9 percent compared with October 2012. Purchases of single-family homes decreased 4.1 percent to an annual rate of 4.49 million. Multifamily properties including condominiums sold at a pace of 630,000, an increase of 3.3 percent from the previous period.
Existing-home sales, which are counted when a purchase contract closes, are rebounding from a 13-year low of 4.11 million in 2008. That’s almost 3 million fewer than the record attained in 2005.
The average rate for a 30-year fixed mortgage was 4.35 percent in the week ended Nov. 14, up from 3.34 percent a year ago, according to Freddie Mac in McLean, Virginia.
Confidence among U.S. homebuilders hovered at a four-month low in November as buyer traffic waned, figures from the National Association of Home Builders/Wells Fargo showed this week.
D.R. Horton Inc., the largest U.S. homebuilder by revenue, last week reported a higher quarterly profit as it increased prices. Residential construction firms have increased profit margins by cutting costs and raising prices as a tight supply of existing properties boosts demand.
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