Purchases of previously owned U.S. homes fell in October to the lowest level in four months as limited supply and higher mortgage rates restrained momentum in the housing market recovery.
Sales dropped more than 3% to a 5.12 million annual rate, the fewest since June, according to data released today by the National Association of Realtors in Washington. The median forecast of 76 economists surveyed by Bloomberg projected a 5.14 million pace.
Concern that fiscal gridlock in Washington will damage the economy combined with the increase in borrowing costs amid expectations Federal Reserve policy makers will soon dial back monetary stimulus have
“The housing data has downshifted in recent months, presumably because of the pop in mortgage rates beginning in the spring,” Thomas Simons, an economist at Jefferies LLC in New York, said in an emailed note. “Low inventories may also be impeding sales.”
Sales forecasts in the Bloomberg survey ranged from 4.9 million to almost 5.4 million. The September reading remained at an almost 5.3 million pace.
The median price of an existing property increased nearly 13% percent in October from the year before to $199,500, Wednesday’s figures showed.
The jump in property values reflects a changing in the “mix” of sales toward higher-end properties, NAR chief economist Lawrence Yun said at a press conference as the figures were released. There is a very limited supply of houses priced at $100,000 or less, leading to a 16% drop in sales in that category over the past year, he said. In contrast, sales of homes costing $250,000 or more are up 20% to 30% over the same period, he said.
Purchases decreased in all four regions, led by a more than 7% slump in the West.
About 13% of real estate agents polled said contract closings were delayed because the government shutdown held back income verification by the Internal Revenue Service and processing by the Federal Housing Administration, says Yun.
“Clearly, the affordability conditions are worsening,” Yun says. “Also, the lack of inventory” is hurting demand, particularly in the West.
Sales will probably remain subdued through the first quarter of 2014, says Yun. They will pick up thereafter, spurred by gains in employment, he says.
There were 2.13 million existing homes for sale at the end of October, down from 2.17 million the month prior, the report said. Given the current turnover, it would take 5 months to sell those houses compared with 4.9 months at the end of September.
Inventory was up almost 1% compared with October 2012. Purchases of single-family homes decreased more than 4% percent to an annual rate of almost 4.5 million. Multifamily properties including condominiums sold at a pace of 630,000, an increase of more than 3% from the previous period.
Existing home sales, which are counted when a purchase contract closes, are rebounding from a 13-year low a little above 4 million in 2008. That’s almost 3 million fewer than the record attained in 2005.
