Existing home sales post monthly increase for first time in six months

Sales of existing homes in the United States were up from the previous month for the first time in half a year in October, according to the National Association of Realtors. The sales pace continued to fall on an annual basis.

In its latest report on existing home sales, the National Association of Realtors said sales of existing homes—including single-family homes, condominiums, townhomes, and co-ops—were on a seasonally adjusted annual rate of 5.22 million sales. This marked a reversal of six consecutive months of month-over-month declines, with sales up 1.4 percent from September. However, year-over-year declines continued for the eighth straight month, with the figure down 5.1 percent from October 2017.

Lawrence Yun, chief economist at the National Association of Realtors, said a stabilizing inventory of home listings has helped bring more buyers into the market. Following three straight years of annual decreases in inventory, the number of homes available for sale has been increasing in recent months. A total of 1.85 million homes were listed for sale at the end of October, down 1.88 million in September but up from 1.8 million in October 2017.

The median home for sale during the month had a price of $255,400, a year-over-year increase of 3.8 percent. October was the 80th straight month of annual home price gains.

"As more inventory enters the market and we head into the winter season, home price growth has begun to slow more meaningfully," said Yun. "This allows for much more manageable, less frenzied buying conditions."

Condominium and co-op sales represented the bulk of the existing sales increase. These units sold at a seasonally adjusted annual rate of 600,000 in October, a 5.3 percent increase from September but a year-over-year drop of 3.2 percent. The median price for a condominium or co-op was $236,200, inching down 0.2 percent from October 2017.

Single-family homes had an annual sales rate of 4.62 million, up 0.87 percent from the previous month but down 5.3 percent from the previous year. The median price for a single-family home was $257,900, up 4.3 percent from the previous year.

While buyers saw some relief due to the improved inventory, they continued to face challenges in other areas. Competition in October remained strong, with the typical property finding a buyer after 33 days. This was down from 34 days in October 2017, but up from 32 days in September. Forty-six percent of the month's sales had been listed for less than a month before they were sold.

In addition to continuing gains in home prices, buyers also faced affordability pressures from higher mortgage rates. According to Freddie Mac, the average commitment rate for a 30-year fixed rate mortgage in October was 4.83 percent, up from 4.63 percent in September and the 2017 average of 3.99 percent.

"Rising interest rates and increasing home prices continue to suppress the rate of first-time homebuyers," said Yun. "Home sales could further decline before stabilizing. The Federal Reserve should, therefore, reevaluate its monetary policy of tightening credit, especially in light of softening inflationary pressures, to help ease the financial burden on potential first-time buyers and assure a slump in the market causes no lasting damage to the economy."

Thirty-one percent of October's sales went to buyers purchasing their first home. The share of first-time buyers was down from 32 percent in both the previous month and previous year, as well as 33 percent in the National Association of Realtors' Profile of Home Buyers and Sellers report released in October.

Individual investors bought 15 percent of the existing homes sold in October, up from 13 percent in both September and October 2017. These buyers often purchase a property without financing, and all-cash sales represented 23 percent of October's sales – up from 21 percent in the previous month and 20 percent in the previous year.

Distressed sales remained at a record low of 3 percent for the second straight month, down from 4 percent in October 2017. Two percent of October's sales were foreclosures, while just 1 percent were short sales.

While existing sales were down on an annual basis in each of the four geographical regions identified by the National Association of Realtors, they were up from the previous month in three regions. The Midwest was the only region with a month-over-month decline, with its seasonally adjusted annual rate falling 0.8 percent from September and 3.1 percent from October 2017 to 1.27 million. The median home price in the region rose 2.4 percent from the previous year to $197,000.

The annual rate in the West, 1.11 million, had the strongest month-over-month gain at 2.8 percent. However, it also had the steepest annual decline at 11.2 percent. The median price in this region was $382,900, a year-over-year increase of 1.9 percent.

In the Northeast, the annual sales rate increased 1.5 percent from the previous month but fell 6.8 percent from the previous year to stand at 690,000. The median price in the region increased 3 percent to $280,900.

The South had an annual rate of 2.15 million sales, up 1.9 percent from September and down 2.3 percent from October 2017. The region had the strongest year-over-year price growth, with the median home price rising 3.8 percent to $221,600.

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