WASHINGTON - Sales of previously owned homes in the U.S. unexpectedly rose in October, a sign falling prices may be attracting buyers.
Purchases increased 1.4 percent to a 4.97 million annual rate, the National Association of Realtors said Monday in Washington. The median forecast of 75 economists surveyed by Bloomberg News was for a 4.8 million rate. The median house price dropped 4.7 percent from a year earlier, and the number of properties for sale was the lowest for any October since 2005.
Borrowing costs near a record low are helping homebuyers take advantage of housing that’s growing more affordable as prices drop. At the same time, the end of a temporary halt on foreclosures may push more properties onto the market, triggering further slides in value that may prevent the industry from recovering for years.
“The housing market is stabilizing, but it has a long road to a full recovery,” said Sal Guatieri, a senior U.S. economist at BMO Capital Markets in Toronto. “There are still a lot of depressed properties in the pipeline that will hit the market, and demand likely needs to strengthen above a 5 million annual rate to absorb the overhang of unsold homes and alleviate the downward pressure on prices.”
Stocks dropped, extending last week’s decline, as U.S. lawmakers failed to agree on budget cuts. The Standard & Poor’s 500 index fell 1.9 percent to close at 1,192.98 in New York. Treasury securities rose, sending the yield on the benchmark 10- year note down to 1.97 percent from 2.01 percent late on Nov. 18.
Reports from Asia and Europe today underscored concern the global economy is slowing.
Growth in Germany, Europe’s largest economy, may cool to a near standstill next year as the region’s debt crisis saps demand for exports, the Bundesbank said.
Japanese exports dropped 3.7 percent in October from a year earlier, Singapore said its growth may slow to as little as 1 percent in 2012 from 5 percent this year, and China signaled the global economy faces an extended slide.
The world economic situation is “extremely severe,” Chinese Vice Premier Wang Qishan said, according to state news agency Xinhua. “The global economic recession triggered by the international financial crisis will be long-term,” he said.
Economists’ estimates for U.S. existing home sales ranged from 4.5 million to 5.14 million. The agents’ group today revised September’s initially reported 4.91 million pace down to 4.9 million.
Existing-home sales, tabulated when a contract closes, rose 12 percent from the same month last year before adjusting for seasonal variations. Total sales in 2010 were 4.9 million, compared with a peak of 7.07 million in 2005 during the boom.
The number of previously owned homes on the market dropped to 3.33 million last month, the fewest since January 2010, the group said Monday.
At the current sales pace, it would take 8 months to sell those houses, down from 8.3 months at the end of September. A range of seven months to eight months supply is consistent with stable home prices, the group has said.
“Maybe we are very close” to seeing home prices stabilize, Lawrence Yun, the group’s chief economist, said in a news conference Monday as the figures were released.
Sales increased even as 33 percent of the group’s members reported having problems with contracts or cancelations in October, jumping from 18 percent the prior month, Yun said. The surge last month was not easily explained, he said, citing changes to conforming loan limits in September and “consistent frustration” over the loan-approval process for short sales as possible explanations.
Of all purchases, cash transactions accounted for about 29 percent, compared with 30 percent in September. Distressed sales, comprised of foreclosures and short sales in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 28 percent of the total in October.
Sales of existing single-family homes increased 1.6 percent to an annual rate of 4.38 million. Purchases of multifamily properties, including condominiums and townhouses, were little changed at 590,000.
Purchases rose in three of four regions, led by a 4.4 percent gain in the West. Demand dropped 5.1 percent in the Northeast.
The median price of a previously owned home decreased to $162,500 from $170,600 in October 2010, today’s report showed. The value plunged from a July 2006 record of $230,300 to a low of $156,100 in February, NAR data show.
A growing glut of seized properties threatens to weigh on prices even more. In the third quarter, U.S. lenders started foreclosures on more homes, the first increase in a year, as bank moratoriums that clogged the pipeline dissipated.
With the housing market weighing on growth, Federal Reserve officials have called for more accommodative policy.
Fed Bank of New York President William C. Dudley said last week that if the central bank opted to purchase more bonds to lower interest rates and stimulate the economy, “it might make sense” for much of those to consist of mortgage-backed securities, which would have a “greater direct impact on the housing market.”
A few additional signs point to stabilization in housing. Builders broke ground on more homes than forecast in October and construction permits climbed to the highest level since March 2010, Commerce Department figures showed Nov. 17. The National Association of Home Builders/Well Fargo index of builder confidence rose to 20 in November, the highest level since May 2010. Readings below respondents said conditions were poor.
“Sales were generated in spite of a near total lack of consumer confidence caused by a litany of factors, including capital markets volatility, stubbornly high unemployment, depressed home prices and an extremely difficult mortgage origination environment,” Allan Merrill, chief executive officer of Beazer Homes USA Inc., said during a Nov. 15 call with analysts. New home sales for the Atlanta-based company’s fiscal 2011 rose 30 percent from a year earlier, he said.
Join PBN for the best networking event and party of the winter - January 15, 2015 - the Book of Lists Party at the Providence Public Library. Reserve your spot by December 31st and get a holiday gift from PBN!
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.