U.S. Sales of Previously Owned Homes Rise as Storm Impact Fades

Sales of previously owned U.S. homes rose to a four-month high, indicating demand was firming at the start of the quarter as the impact from hurricanes faded, according to a National Association of Realtors report released Tuesday.

Highlights of Existing-Home Sales (October)

  • Contract closings rose 2% m/m to a 5.48m annual rate (est. 5.4m) after 5.37m
  • Median sales price increased 5.5% y/y to $247,000
  • Inventory of available properties fell 10.4% y/y to 1.8m, lowest level for Oct. since data began in 1999
  • Second straight y/y sales decline, first back-to-back months since 2014

Key Takeaways

Houston and several areas of Florida saw gains when compared with a year earlier, while Miami is still showing some softness, according to NAR. As in the past, economic activity including in the housing industry typically bounces back after major storms as rebuilding and repair work gets under way.

Housing remains on track for sustained growth and will help underpin the economy’s expansion, now in its ninth year. While sales continue to get support from a steady job market and low borrowing costs, progress has been modest. There’s a persistent shortage of available houses for sale -- especially at the lower end -- and property prices continue to rise faster than wages, making it harder for some potential homebuyers to enter the market.

Another possible headwind comes from tax legislation being advanced in Congress, which the Realtors association strenuously opposes. The group said last week that the plans debated by lawmakers would “overwhelmingly remove the tax incentive to purchase and own a home in America,” and economists surveyed by Bloomberg said the House bill would reduce demand from homebuyers.

Official’s View

“The momentum appears to be good,” Lawrence Yun, NAR’s chief economist, said at a press briefing accompanying the report. The hurricane impact was “more modest” than anticipated in October and activity is “quickly bouncing back.”

The tax plan could be a “major wild-card disrupter to the housing recovery,” he said. Even so, he sees another “respectable year in 2018,” provided any tax changes don’t set back demand.

Other Details

  • Purchases rose in all four regions in October from the prior month, led by a 4.2 percent increase in the Northeast; sales rose 1.9 percent in the South, the biggest region
  • At the current pace, it would take 3.9 months to sell the homes on the market, lowest for Oct. in data back to 1999; Realtors group considers less than five months’ supply consistent with a tight market
  • Single-family home sales rose 2.1 percent from prior month to annual rate of 4.87 million; purchases of condominium and co-op units up 1.7 percent to 610,000 pace
  • First-time buyers made up 32 percent of all sales, compared with 29 percent in prior month; 40 percent is “normal” share, NAR’s Yun says
  • Homes typically sold in 34 days, compared with 41 days in October 2016
  • 47 percent of homes sold in October were on market for less than a month
  • Existing home sales account for 90 percent of the market and are calculated when a contract closes; new home sales, considered a timelier indicator though their share is only about 10 percent, are tabulated when contracts get signed

— With assistance by Jordan Yadoo

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