Sales of existing homes were hit with their first monthly decline since July as October sales fell 2.2% to a seasonally adjusted 4.43 million-unit annual rate, the National Association of Realtors announced Tuesday. A Bloomberg survey had expected a 4.5 million-unit annual rate, after September's revised 4.53 million.
Sales are down 25.9% from the 5.89 million-unit rate registered in October 2009, a big drop from the 19.1% year-over-year decline registered in September. However, the October 2009 stat was skewed higher by Congress's original homebuyer tax credit.
The October report had one small bright spot. Home inventories fell 3.4% to 3.86 million units, or a 10.5-month supply at the current sales pace. That's down from a revised 10.6-month supply in September. Still, a healthy resale market has a three- to five-month supply of homes. Also, the current inventory number is about double the 2 million-unit 30-year average.
Getting inventories back to normal levels will be important because it's one key to stabilizing home prices, and the return of healthy home-value appreciation rates of 4% to 7% per year.
A Choppy Recovery Ahead
In October, sales fell in every U.S. region: They were down 1.1% in the Midwest, 1.3% in the Northeast, 1.9% in the West and 3.4% in the South.
NAR Chief Economist Lawrence Yun said the uncertain status of the U.S. foreclosure process is likely to complicate existing-home sales totals in the immediate quarters ahead, but he still expects an uptrend in 2011.
"The housing market is experiencing an uneven recovery, and a temporary foreclosure stoppage in some states is likely to have held back a number of completed sales. Still, sales activity is clearly off the bottom and is attempting to settle into normal, sustainable levels," Yun said in a statement. "Based on current and improving job market conditions, and from attractive affordability conditions, sales should steadily improve to healthier levels of above 5 million by spring of next year."
The median sales price for a single-family home was $171,100 in October, down 0.5% from a year ago. The median sales price for a condominium, at $166,000, was down 4.2% from a year ago. Medan sales prices for all types of housing in October by region were as follows: Northeast, $240,200, up 1.9% from a year ago; Midwest, $139,500, down 3.6%; South, $148,700, down 0.7%; and West, $209,300, down 4.8%.
Not Really an October Surprise
Also, first-time buyers bought 32% of existing homes in October, unchanged from September, but down from 50% a year ago during the initial homebuyer tax credit surge.
As the first dip in three months, October's 2.2% decline was a disappointment, but it's not entirely unexpected. Homes sales historically cool slightly in October, as the busy summer moving season ends. Add concern about jobs and consumers' belief that prices will rise only slightly in certain markets, and may decline in many others, and it's easy to see why sales aren't galloping ahead.
The U.S. economy will have to show solid, 2.5%-plus GDP growth for a couple more quarters, with adequate job growth, to increase homebuyer confidence that the housing sector's protracted slump has finally hit bottom.