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Existing-Home Sales Rise on Improved Affordability

October 27, 2008

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 5.5 percent to a seasonally adjusted annual rate¹ of 5.18 million units in September from a level of 4.91 million in August, and are 1.4 percent higher than the 5.11 million-unit pace in September 2007.

Lawrence Yun, NAR chief economist, said more markets are seeing year-over-year gains. “The sales turnaround which began in California several months ago is broadening now to Colorado, Kansas, Minnesota, Missouri and Rhode Island,” he said. “The South was hampered by much lower home sales in Houston in the aftermath of Hurricane Ike.”

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said low home prices and low interest rates have been attracting buyers. “This is the first time since November 2005 that home sales have been above year-ago levels,” he said. “Credit tightened at the end of September, but the improvement demonstrates that buyers who’ve been on the sidelines want to get into the market to make a long-term investment in their future.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 6.04 percent in September from 6.48 percent in August; the rate was 6.38 percent in September 2007.

Yun said there may be market disruptions. “The credit markets are not settled yet, although the mortgage market stabilized with the government takeover of Fannie Mae and Freddie Mac. Inventory remains high, and price declines are pressuring owners,” he said. “Additional housing stimulus would stabilize prices more quickly, which in turn would bring faster stability to Wall Street. Removing the repayment feature on the first-time buyer tax credit and permanently raising loan limits would bring more buyers into the market and further reduce inventory.”

Total housing inventory at the end of September fell 1.6 percent to 4.27 million existing homes available for sale, which represents a 9.9-month supply² at the current sales pace, down from a 10.6-month supply in August. This marks two consecutive monthly declines since inventories peaked in July.

The national median existing-home price3 for all housing types was $191,600 in September, down 9.0 percent from a year ago when the median was $210,500. “Compared to a fairly small share of foreclosures or short sales a year ago, distressed sales are currently 35 to 40 percent of transactions. These are pulling the median price down because many are being sold at discounted prices,” Yun explained. “The current market is not being dominated by speculative investors. Rather, 80 percent of current buyers are purchasing a primary residence, which is a bit higher than historic norms.”

Single-family home sales increased 6.2 percent to a seasonally adjusted annual rate of 4.62 million in September from a pace of 4.35 million in August, and are 3.8 percent above the 4.45 million-unit level a year ago. The median existing single-family home price was $190,600 in September, which is 8.6 percent below September 2007.

Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 560,000 units in September, but are 15.7 percent below the 664,000-unit pace in September 2007. The median existing condo price4 was $199,400 in September, down 10.2 percent from a year ago.

Regionally, existing-home sales in the West jumped 16.8 percent to an annual rate of 1.25 million in September, and are 34.4 percent higher than September 2007. The median price in the West was $253,600, down 18.5 percent from a year ago.

In the Midwest, existing-home sales increased 4.4 percent to an annual pace of 1.19 million in September, but are 2.5 percent below a year ago. The median price in the Midwest was $152,500, which is 7.9 percent lower than September 2007.

Existing-home sales in the South rose 2.2 percent in September to a pace of 1.90 million but remain 7.8 percent below September 2007. The median price in the South was $167,200, down 4.1 percent from a year ago.

In the Northeast, existing-home sales slipped 1.2 percent to an annual pace of 840,000 in September, and are 7.7 percent lower than a year ago. The median price in the Northeast was $246,800, down 5.4 percent from September 2007.

Source: The National Association of Realtors



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