October saw existing-home sales decline for the second straight month as low inventory propped up prices, theNational Association of Realtors (NAR) reported Wednesday.
Total existing-home sales—completed transactions of single-family homes, townhomes, condominiums, and co-ops—fell 3.2 percent from September to October, coming out to a seasonally adjusted annual rate of 5.12 million. Compared to last year, sales were still up 6.0 percent, marking the 28th consecutive month of year-over-year improvement.
“The erosion in buying power is dampening home sales,” said NAR chief economist Lawrence Yun. “Moreover, low inventory is holding back sales while at the same time pushing up home prices in most of the country. More new home construction is needed to help relieve the inventory pressure and moderate price gains.”
The national median existing-home price for all housing types was $199,500, up 12.8 percent annually.
Part of the rise in median price came from a smaller share of discounted distressed sales: Foreclosures and short sales together made up 14 percent of October’s sales (9 percent foreclosures and 5 percent short sales) compared to 25 percent last year.
At the same time, inventory remains a challenge. The total number of existing homes available for sale at the end of October was 2.13 million, down 1.8 percent year-over-year. At the current sales pace, inventory levels come to a 5.0-month supply, NAR reported.
As has been the case for some time, the West felt the greatest strain from low supply, reporting a 7.1 percent monthly drop in existing-home sales to a pace of 1.17 million. Compared to October 2012, sales were down 0.8 percent.
All the other regions saw declines, though not as dramatic: Existing-home sales fell 2.9 percent in the Northeast to an annual rate of 670,000; 1.6 percent in the Midwest to a rate of 1.22 million; and 1.9 percent in the South to an annual level of 2.06 million.
Besides supply problems, another obstacle stands in the way: an “unnecessarily restrictive” credit environment,NAR says.
“Although mortgage interest rates are still historically affordable, some financially qualified buyers are being denied a loan,” said NAR president Steve Brown. “The risk-averse nature of lending also is impacting small builders who are unable to get construction loans, even when they see strong local demand.
“We simply have to reverse the pendulum swing back toward the middle to give more creditworthy borrowers access to safe and sound financing.”