Sales of existing homes fell in September

A for sale sign sits in front of a home in Miami Lakes, Fla.
A for sale sign sits in front of a home in Miami Lakes, Fla.

Washington - Sales of previously owned homes held near a two-year high in September, restrained by a lack of supply that is pushing prices higher.

Purchases of existing houses, tabulated when a contract closes, decreased 1.7 percent to a 4.75 million annual rate, matching the median forecast of economists surveyed by Bloomberg, figures from the National Association of Realtors showed Friday in Washington. The median prices from a year earlier jumped by the most since 2005 as inventories dwindled.

Prospective homebuyers are taking advantage of close to record-low mortgage rates and lower prices, bolstering signs the industry is healing after a multiyear slump. Gains in employment, easier access to credit and a reduction in foreclosures will be key to boosting rebound, allowing housing to become a bigger contributor to economic growth.

"There are a lot of reasons to be positive on housing," said Tom Simons, an economist at Jefferies Group Inc. in New York, who correctly projected the drop. "Mortgage rates are near all-time lows, and inventories are at generational lows. If housing prices continue to rise, people are incentivized to get off the sidelines. It all sets up for continued improvement."

The median forecast of 78 economists surveyed by Bloomberg called for a drop to a 4.75 million rate. Estimates ranged from 4.53 million to 4.9 million. The prior month's pace was revised to 4.83 million from a previously reported 4.82 million.

The median price of an existing home climbed 11.3 percent from September 2011 to $183,900, Friday's report showed.

Compared with a year earlier, purchases increased 11 percent.

The number of previously owned homes dropped 3.3 percent to 2.32 million. At the current sales pace, it would take 5.9 months to sell those houses compared with 6 months at the end of August. The months' supply was the lowest since March 2006.

The market is now heading into a traditionally weak period for inventory, indicating the month's supply may drop to the 5 month area in the period from December to February, Lawrence Yun, NAR chief economist, said in a news conference as the figures were released.

"Certainly we have broken out of the slump," Yun said. "Prices are now showing an accelerating trend. This is a reflection of low inventory. Builders need to increase production."

Sales of existing single-family homes decreased 1.9 percent to an annual rate of 4.21 million.

Purchases of multifamily properties, including condominiums and townhouses, were little changed at 540,000 pace.

Purchases dropped in three of four regions, led by a 6.3 percent decrease in the Northeast. Demand rose 0.5 percent in the South.

Construction companies are showing an improvement in earnings. Miami-based Lennar Corp., the third-largest U.S. homebuilder by revenue, said its third-quarter profit more than quadrupled as revenue climbed.

"Overall demand has been improving and we've seen a consistent sales pace at improving prices," Chief Executive Officer Stuart Miller said on a Sept. 24 conference call with analysts. "The homebuilding business is beginning to revert to normal and that's positive for the U.S. economy in general."

Existing-home sales have improved after reaching a low of a 3.39 million annual rate in July 2010. In the buildup to the subprime lending collapse and recession, purchases reached a peak of 7.25 million in September 2005.

Other reports signal that housing is on the mend. Home starts surged 15 percent in September to an 872,000 annual rate, the fastest since July 2008, according to Commerce Department data released this week. An increase in building permits signaled the gains will be sustained.

Construction companies are less pessimistic. The National Association of Home Builders/Wells Fargo builder sentiment index increased to 41 this month, the highest since June 2006 and the sixth straight gain. Still, readings below 50 mean more respondents said conditions were poor.

Demand for new homes, another harbinger of progress, may have climbed to a two-year in September, according to economists surveyed by Bloomberg. The report is due on Oct. 24 from the Commerce Department.

The Federal Reserve in its Beige Book survey released Oct. 10 said the housing market showed "widespread improvement since the last report." All twelve Fed districts reported that "existing home sales strengthened, in some cases substantially."


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