After declining for six consecutive months, existing home sales increased in October, rising in three of four major U.S. regions.
Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 1.4% from September to a seasonally adjusted rate of 5.22 million in October, according to the latest report from the National Association of Realtors. However, the report revealed sales are 5.1% below October 2017's rate.
NAR Chief Economist Lawrence Yun said the increase in housing inventory has brought more buyers to the market.
“After six consecutive months of decline, buyers are finally stepping back into the housing market,” Yun said. “Gains in the Northeast, South and West – a reversal from last month’s steep decline or plateau in all regions – helped overall sales activity rise for the first time since March 2018.”
The median existing home price for all housing types increased to $255,400, climbing 3.8% from last October’s rate of $246,000. This marks the 80th straight month of year-over-year gains.
Total housing available for sale declined from September, retreating from 1.88 million existing homes on the market to 1.85 million in October. But it's up from last year’s total of 1.80 million.
Unsold inventory rests at a 4.3-month supply at the current sales pace, decreasing from last month’s total of 4.4. The total was 3.9 months a year ago at this time.
“As more inventory enters the market and we head into the winter season, home price growth has begun to slow more meaningfully,” Yun continued. “This allows for much more manageable, less frenzied buying conditions.”
Properties stayed on the market an average of 33 days in October, moving up from 32 days in September but still down from 34 days in 2017. The report states that 46% of homes stayed on the market for less than a month.
The report states, the average commitment rate for a 30-year, conventional, fixed-rate mortgage climbed from 4.63% the month prior to 4.3% in October and the average commitment rate for all of 2017 remained at 3.99%, according to Freddie Mac.
“Rising interest rates and increasing home prices continue to suppress the rate of first-time homebuyers. Home sales could further decline before stabilizing,” Yun explained. “The Federal Reserve should, therefore, re-evaluate 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.”
First-time buyers were 31% of sales in October, a decrease from 32% in September and October of last year. NAR revealed that the annual share of first-time buyers remained at 33%.
“Despite this much-welcomed month over month gain, sales are still down from a year ago, a large reason for which is affordability challenges from higher interest rates,” NAR President John Smaby said. “Prospective buyers looking for their dream home in this market should contact a Realtor as a first step in the buying process to help them navigate this more challenging environment.”
Single-family home sales edged up from a seasonally adjusted annual rate of 4.58 million in September to 4.62 million in October 5.3% below 4.88 million a year ago. The median existing single-family home price was $257,900 in October, increasing 4.3% from October 2017.
Existing condominium and co-op sales recorded a seasonally adjusted annual rate of 600,000 units in October, rising 5.3% from September, but down and 3.2% from a year ago. The median existing condo price was $236,200 in October, slightly decreasing 0.2% from 2017.
Existing home sales in the Northeast grew 1.5% to an annual rate of 690,000 in September, which is a 6.8% above a year ago. The median price in the Northeast increased 3% from October 2017 and came in at 280,900.
In the Midwest, existing-home sales inched back from the prior month at an annual rate of 1.27 million and 3.1% below October 2017. The median price in the Midwest was $197,000, increasing 2.4% from this time last year.
Southern existing-home sales moderately rose 1.9% to an annual rate of 2.15 million in October, down from 2.3% last year. Notably, the median price in the South was $221,600, increasing 3.8% from October 2017.
Existing home sales in the West increased 2.8% to an annual rate of 1.11 million in October, which is a whopping 11.2% below October 2017. The median price in the West was $382,900 increasing 1.9% from this time last year.
TIAA Bank Executive Vice President John Pataky said this report doesn’t inspire too much confidence in the existing home market but isn’t as gloomy as it might have been.
“One trend that could be helping is the fact that rising rates, coupled with prohibitive prices and supply in new homes, might be driving some buyers to the existing-home market,” Pataky continued. “We’ve found that new home buyers in particular are attracted to urban markets with a high concentration of existing properties, which may also be buoying these numbers.”
“However, this report also shows that the tight supply and rising 30-year mortgage rates that are paining the new-home market are affecting the existing-home market as well. Unless we see more significant moderation in price growth, we’re going to see fewer ‘Sold’ signs on Main Street in 2019,” Pataky concluded.