Despite increased housing affordability, existing-home sales dropped in October as concerns about the economy increased, according to the National Association of Realtors. Existing-home sales, which include single-family, townhomes, condominiums and co-ops, dropped 3.1 percent from September, to a seasonally adjusted rate of 4.98 million units in October; that number is 1.6 percent below the level of October 2007.
“Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions,” NAR chief economist Lawrence Yun said in a statement. “We have favorable affordability conditions, but we need more than that to give buyers with jobs the confidence they need.”
The median price for existing homes was $183,300, an 11.3-percent drop from a year ago. There continues to be a “significant downward distortion” in pricing due to discounted prices from distress sales, according to NAR.
Total housing inventory at the end of October was at 4.23 million existing homes available for sale, which represents a 10.2-month supply at the current sales pace, up from a 10.0-month supply in September.
Inventories will remain “stubbornly high” for next few months because of weak sales, combined with a slowdown in the household formation rate, according to Patrick Newport, U.S. economist with Lexington, Mass.-based Global Insight. The household formation rate is slowing because job losses and rising foreclosures are leading more people to move in with relatives or friends, Newport said in a statement.
Regionally, existing-home sales increased 37.5 percent in the West from October 2007, but median prices there were down 27 percent from a year ago, evidence that distress sales are driving the market. In the South, existing-home sales declined 10.2 percent from October 2007; the median price of a house in the South dropped 5.8 percent from a year ago. In the Northeast, both sales and the median price are down 9.8 percent than in October 2007; in the Midwest, sales were down 9.1 percent below October 2007; the median price was down 6.7 percent from a year ago.
Pat Curry is senior editor, sales and marketing, at BUILDER magazine.