October Existing-Home Sales Rise, Unsold Inventory Continues to Decline
WASHINGTON (November 21, 2011) - Existing-home sales improved in October while the number of homes on the market continued to decline, according to the National Association of Realtors®.
Total existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 1.4 percent to a seasonally adjusted annual rate of 4.97 million in October from a downwardly revised 4.90 million in September, and are 13.5 percent above the 4.38 million unit level in October 2010.
Lawrence Yun, NAR chief economist, said the market has been fairly steady but at a lower than desired level. “Home sales have been stuck in a narrow range despite several improving factors that generally lead to higher home sales such as job creation, rising rents and high affordability conditions. Many people who are attempting to buy homes are thwarted in the process,” he said.
“A higher rate of contract failures has held back a sales recovery. Contract failures2 reported by NAR members jumped to 33 percent in October from 18 percent in September, and were only 8 percent a year ago, so we should be seeing stronger sales,” Yun added.
Contract failures are cancellations caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including home inspections and employment losses. “Other recent factors include disruption in the National Flood Insurance Program, and lower loan limits for conventional mortgages, which paradoxically force some of the most creditworthy consumers to pay unnecessarily higher interest rates,” Yun said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.07 percent in October from 4.11 percent in September; the rate was 4.23 percent in October 2010.
NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said consumers can increase their odds of obtaining a mortgage by being aware of how credit scores are determined. “If you want to get a mortgage, don’t buy a car or take on new installment debt or credit cards,” he said.
“Pay all your bills on time, maintain old credit lines and don’t use more than 30 percent of your credit limit. Realtors® can help you understand the issues surrounding access to affordable credit, in addition to helping you find the right home and negotiate terms,” Veissi said.
An ongoing positive trend is a steady decline in the number of homes on the market. Total housing inventory at the end of October fell 2.2 percent to 3.33 million existing homes available for sale, which represents an 8.0-month supply3 at the current sales pace, down from an 8.3-month supply in September. Inventories have been trending gradually down since setting a record of 4.58 million in July 2008.
The national median existing-home price4 for all housing types was $162,500 in October, which is 4.7 percent below October 2010. Distressed homes—foreclosures and short sales typically sold at deep discounts—slipped to 28 percent of sales in October from 30 percent in September (17 percent were foreclosures and 11 percent were short sales); they were 34 percent in October 2010.
“In some areas we’re hearing about shortages of foreclosure inventory in the lower price ranges with multiple bidding on the more desirable properties,” Yun said. “Realtors® in such areas are calling for a faster process of getting foreclosure inventory into the market because they have ready buyers. In addition, extending credit to responsible investors would help to absorb inventory at an even faster pace, which would go a long way toward restoring market balance.”
All-cash sales accounted for 29 percent of purchases in October, little changed from 30 percent in September and 29 percent in October 2010; investors make up the bulk of cash transactions.
Investors purchased 18 percent of homes in October, compared with 19 percent in September and 19 percent in October 2010. First-time buyers accounted for 34 percent of transactions in October, up from 32 percent in September; they were 32 percent in October 2010.
Single-family home sales increased 1.6 percent to a seasonally adjusted annual rate of 4.38 million in October from 4.31 million in September, and are 13.8 percent higher than the 3.85 million-unit pace one year ago. The median existing single-family home price was $161,600 in October, which is 5.8 percent below October 2010.
Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 590,000 in October but are 10.5 percent above the 534,000-unit level in October 2010. The median existing condo price5 was $160,300 in October, down 1.5 percent from a year ago.
Regionally, existing-home sales in the Northeast fell 5.1 percent to an annual level of 750,000 in October but are 1.4 percent above October 2010. The median price in the Northeast was $224,400, down 5.5 percent from a year ago.
Existing-home sales in the Midwest rose 2.8 percent in October to a pace of 1.10 million and are 19.6 percent higher than October 2010. The median price in the Midwest was $132,800, which is 4.7 percent below a year ago.
In the South, existing-home sales increased 2.1 percent to an annual level of 1.94 million in October and are 14.1 percent above a year ago. The median price in the South was $145,700, down 1.6 percent from October 2010.
Existing-home sales in the West rose 4.4 percent to an annual pace of 1.19 million in October and are 15.5 percent higher than October 2010. The median price in the West was $207,500, which is 1.6 percent below a year ago.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
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NOTE: NAR also tracks monthly comparisons of existing single-family home sales and median prices for select metropolitan statistical areas, which is posted with other tables at: www.realtor.org/research/research/ehsdata. For information on areas not included in the report, please contact the local association of Realtors®.
1Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 to 90 percent of total home sales, are based on a much larger sample — more than 40 percent of multiple listing service data each month — and typically are not subject to large prior-month revisions.
The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.
Benchmark Revisions: All major statistical data series go through periodic reviews and revisions to ensure that sampling and methodology keep up with changes in the market, such as population changes in sampled areas, to ensure accuracy. NAR began its normal process for benchmarking sales at the beginning of this year in consultation with government agencies, outside housing economists and academic experts.
There will be no change to median prices or months-supply of inventory. Although there will be downward revisions to sales volume and unsold inventory, there will be no notable change to previous characterizations of the market in terms of sales trends, monthly percentage changes, etc.
In the past NAR has benchmarked to the decennial Census, most recently to the 2000 Census, because it included home sales data. However, the data are no longer included in the Census, so we’ve had to develop a new approach using an independent source to improve methodology and to permit more frequent revisions.
Preliminary data for the new benchmark will undergo broad review shortly by professional economists and government agencies. After any issues that may surface in the review process are addressed, we will update monthly seasonal adjustment factors and publish revisions.
2 Contract failures, all-cash transactions, investors, first-time buyers, and distressed sales are from a monthly survey for the Realtors® Confidence Index, posted at Realtor.org.
3Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, condos were measured quarterly while single-family sales accounted for more than 90 percent of transactions).
4The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
5Because there is a concentration of condos in high-cost metro areas, the national median condo price often is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
The Pending Home Sales Index for October will be released November 30, and existing-home sales for November is scheduled for December 21. The Commercial Real Estate Outlook and market report for the 3rd quarter will be published November 28; all release times are 10:00 a.m. EST.
Information about NAR is available at www.realtor.org. This and other news releases are posted in the News Media section. Statistical data in this release, other tables and surveys also may be found by clicking on Research.
REALTOR® is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics. Not all real estate agents are REALTORS®. All REALTOR® are members of NAR.