Economic volatility softens existing home sales

Economic concerns and uncertainty led to a drop in existing-home sales in October, according to the National Association of Realtors.

Existing-home sales - including single-family homes, townhomes, condominiums and co-ops - fell 3.1 percent to a seasonally adjusted annual rate of 4.98 million units in October, from a downwardly revised pace of 5.14 million in September, and they are 1.6 percent below the 5.06 million-unit level of October 2007.

NAR Chief Economist Lawrence Yun said consumer hesitation is understandable.

"Many potential homebuyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions," he said in a news release. "We have favorable affordability conditions, but we need more than that to give buyers with jobs the confidence they need. This is why a housing stimulus is so critical now to encourage more buyers to draw down the inventory and stabilize home prices. Without home-price stabilization, there will not be an economic recovery."

Inventory levels

Total housing inventory at the end of October slipped 0.9 percent to 4.23 million existing homes available for sale, which represents a 10.2-month supply at the current sales pace.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.20 percent in October from 6.04 percent in September.

Even with the overall decline, Yun identified a number of areas with solid sales gains from a year ago, including many California and Florida markets as well as Boston, Minneapolis and Denver.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said the need for professional assistance is growing.

"Navigating the transaction process is easier said than done without professional assistance in today's market," he added. "Proper valuation when many homes are being sold below replacement construction costs is very challenging - buyers remain in the driver's seat."

Declines by home type

The national median existing-home price for all housing types was $183,300 in October, down 11.3 percent from a year ago when the median was $206,700. There remains a significant downward distortion in the current price from a large number of distress sales at discounted prices.

Single-family home sales declined 3.3 percent to a seasonally adjusted annual rate of 4.43 million in October from a level of 4.58 million in September, but are unchanged from a 4.43 million-unit pace in October 2007. The median existing single-family home price was $181,800 in October, down 11.2 percent from a year ago.

Existing condominium and co-op sales eased by 1.8 percent to a seasonally adjusted annual rate of 550,000 units in October from 560,000 in September, and are 12.0 percent below the 625,000-unit pace of a year ago. The median existing condo price was $193,000 in October, which is 13 percent below the median for those properties in October 2007.

Geographic differences

Existing-home sales in the Midwest fell 6 percent in October to a pace of 1.1 million and remain 9.1 percent below October 2007. The median price was $149,400, down 6.7 percent from a year ago.

Existing-home sales in the Northeast slipped 1.2 percent to an annual pace of 830,000 in October, and are 9.8 percent lower than a year ago. The median price was $241,700, down 9.8 percent from October 2007.

Existing-home sales in the West eased by 1.6 percent to an annual rate of 1.21 million in October but are 37.5 percent higher than October 2007. The median price was $231,400, down 27 percent from a year ago.

In the South, existing-home sales fell 3.2 percent to an annual pace of 1.84 million in October, and are 10.2 percent below a year ago. The median price was $161,100, which is 5.8 percent lower than October 2007.