Existing-Home Sales Rise in October with Ongoing Price and Equity Gains
WASHINGTON (November 19, 2012) – Sales of existing homes increased in October, even with some regional impact from Hurricane Sandy, while home prices continued to rise due to lower levels of inventory supply, according to the National Association of Realtors®.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 2.1 percent to a seasonally adjusted annual rate of 4.79 million in October from a downwardly revised 4.69 million in September, and are 10.9 percent above the 4.32 million-unit level in October 2011.
Lawrence Yun , NAR chief economist, said there was some impact from Hurricane Sandy. "Home sales continue to trend up and most October transactions were completed by the time the storm hit, but the growing demand with limited inventory is pressuring home prices in much of the country," he said. "We expect an impact on Northeastern home sales in the coming months from a pause and delays in storm-impacted regions."
The national median existing-home price2 for all housing types was $178,600 in October, which is 11.1 percent above a year ago. This marks eight consecutive monthly year-over-year increases, which last occurred from October 2005 to May 2006.
"Rising home prices have already resulted in a $760 billion growth in home equity during the past year," Yun said. "Given that each percentage point of price appreciation translates into an additional $190 billion in home equity, we could see close to a $1 trillion gain next year."
Distressed homes3 - foreclosures and short sales sold at deep discounts - accounted for 24 percent of October sales (12 percent were foreclosures and 12 percent were short sales), unchanged from September; they were 28 percent in October 2011. Foreclosures sold for an average discount of 20 percent below market value in October, while short sales were discounted 14 percent.
Total housing inventory at the end of October fell 1.4 percent to 2.14 million existing homes available for sale, which represents a 5.4-month supply 4 at the current sales pace, down from 5.6 months in September, and is the lowest housing supply since February of 2006 when it was 5.2 months. Listed inventory is 21.9 percent below a year ago when there was a 7.6-month supply.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.38 percent in October from 3.47 percent in September; the rate was 4.07 percent in October 2011.
NAR President Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif., said record low mortgage interest rates shouldn't be taken for granted. "Even with rising home prices, we'll continue to see favorable housing affordability conditions over the coming year, but they won't last forever," he said.
"Inflationary pressures are expected to build during the next two years. As a result, mortgage interest rates will also rise with inflation. Buyers who are currently held back by tight mortgage credit standards should work to improve their credit scores so they'll be able to qualify for a mortgage while conditions are still favorable."
With stringent mortgage underwriting standards, Thomas said it's very important to understand credit issues and how credit scores work. "Realtors ® are a good source to learn about lenders with more reasonable terms and ways to increase your likelihood of obtaining safe and sound financing. Buyers can also visit NAR's consumer website, Houselogic.com, and search for 'credit score.'"
The median time on market was 71 days in October, little changed from 70 days in September, but down 26.0 percent from 96 days in October 2011. Thirty-two percent of homes sold in October were on the market for less than a month, while 20 percent were on the market for six months or longer.
First-time buyers accounted for 31 percent of purchases in October, compared with 32 percent in September and 34 percent in October 2011.
All-cash sales were at 29 percent of transactions in October, up slightly from 28 percent in September; they were 29 percent in October 2011. Investors, who account for most cash sales, purchased 20 percent of homes in October, up from 18 percent in September; they were 18 percent in October 2011.
Single-family home sales rose 1.9 percent to a seasonally adjusted annual rate of 4.22 million in October from 4.14 million in September, and are 9.6 percent above the 3.85 million-unit pace in October 2011. The median existing single-family home price was $178,700 in October, which is 10.9 percent higher than a year ago.
Existing condominium and co-op sales rose 3.6 percent to a seasonally adjusted annual rate of 570,000 in October from 550,000 in September, and are 21.3 percent above the 470,000-unit level a year ago. The median existing condo price was $177,500 in October, up 11.7 percent from October 2011.
Regionally, existing-home sales in the Northeast fell 1.7 percent to an annual pace of 580,000 in October but are 13.7 percent above October 2011. The median price in the Northeast was $232,600, which is 4.6 percent above a year ago.
Existing-home sales in the Midwest rose 1.8 percent in October to a level of 1.11 million and are 18.1 percent above a year ago. The median price in the Midwest was $145,600, up 10.6 percent from October 2011.
In the South, existing-home sales increased 2.1 percent to an annual pace of 1.92 million in October and are 11.0 percent higher than October 2011. The median price in the South was $152,200, which is 8.2 percent above a year ago.
Existing-home sales in the West rose 4.4 percent to an annual level of 1.18 million in October and are 3.5 percent above a year ago. With much tighter inventory conditions, the median price in the West was $242,100, up 21.2 percent from October 2011.
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
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NOTE: For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.
1 Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from multiple listing services. Changes in sales trends outside of MLSs are not captured in the monthly series. A rebenchmarking of home sales is done periodically using other sources to assess the overall home sales trend, including sales not reported by MLSs.
Existing-home sales differ 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 account for more than 90 percent of total home sales, are based on a much larger sample - about 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.
2 The median price is where half sold for more and half sold for less; medians are more typical than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to a 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.
3 Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR's Realtors® Confidence Index, posted at nar.realtor.
4 Total 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).
The Pending Home Sales Index for October will be released November 29 and existing-home sales for November is scheduled for December 20; release times are 10:00 a.m. EST.