Sales of previously owned U.S. homes rose to a four-month high, indicating demand was firming at the start of the quarter as the impact from the late summer hurricanes faded, according to a National Association of Realtors report.
Contract closings rose 2% month-over-month in October to an annual rate of 5.48 million. The median sales price increased 5.5% year-over-year to $247,000. But the inventory of available properties fell 10.4% to 1.8 million compared with last October. It is the lowest inventory level for October since data collection began in 1999.
Houston and several areas of Florida saw gains when compared with a year earlier, while Miami is still showing some softness, according to NAR. As in the past, economic activity, including in the housing industry, typically bounces back after major storms as rebuilding and repair work gets under way.
Housing remains on track for sustained growth and will help underpin the economy's expansion, now in its ninth year. While sales continue to get support from a steady job market and low borrowing costs, progress has been modest. There’s a persistent shortage of available houses for sale – especially at the lower end – and property prices continue to rise faster than wages, making it harder for some potential homebuyers to enter the market.
Another possible headwind comes from tax legislation being advanced in Congress, which the Realtors association strenuously opposes. The group said last week that the plans debated by lawmakers would "overwhelmingly remove the tax incentive to purchase and own a home in America," and economists surveyed by Bloomberg said the House bill would reduce demand from homebuyers.
"The momentum appears to be good," Lawrence Yun, NAR's chief economist, said at a press briefing accompanying the report. The hurricane impact was "more modest" than anticipated in October and activity is “quickly bouncing back.”
The tax plan could be a "major wild-card disrupter to the housing recovery," he said. Even so, he sees another "respectable year in 2018," provided any tax changes don't set back demand.
Purchases rose in all four regions in October from the prior month, led by a 4.2% increase in the Northeast; sales rose 1.9% in the South, the biggest region At the current pace, it would take 3.9 months to sell the homes on the market; less than five months' supply is considered consistent with a tight market.
Single-family home sales rose 2.1% from the prior month to annual rate of 4.87 million; purchases of condominium and co-op units were up 1.7% to a 610,000 annual pace. First-time buyers made up 32% of all sales, compared with 29% in September; the normal share is 40%, NAR's Yun said. Homes typically sold in 34 days, compared with 41 days in October 2016, with 47% on market for less than a month.