October Existing-Home Sales Cool, But Low Inventory Drives Prices Up

The median home price rose by double digits compared with October 2012, but with buyer demand outstripping homeowners’ willingness to sell, fewer home sales are closing.

Fewer existing homes sold in October, but prices continued to rise as home supply and demand continued to tilt toward owners in many markets, according to the NATIONAL ASSOCIATION OF REALTORS®.

The number of single-family homes, townhomes, condominiums, and co-ops sold in October fell 3.2%. However, that’s still 6% higher than the number of sales in October 2012. Sales have remained above year-ago levels for the past 28 months.

NAR Chief Economist Lawrence Yun expects flattening home sales in the months ahead. “The erosion in buying power is dampening home sales,” he said. “Moreover, low inventory is holding back sales while at the same time pushing up home prices in most of the country. More new home construction is needed to help relieve the inventory pressure and moderate price gains.”

Median Home Price Up

The national median existing-home price reached $199,500 in October, up 12.8% from October 2012, marking the 11th consecutive month of double-digit year-over-year increases.

One factor influencing home prices was a decline in the number of distressed home sales, including foreclosures and short sales (short sales occur when homeowners sell their homes for less than they owe on their mortgages).

About 14% of October sales were distressed, compared with 25% in October 2012. Foreclosures sold for an average discount of 17% below market value in October, while short sales were discounted 14%.

Inventory

At the end of October, there were 2.13 million existing homes for sale. At the current pace, it would take five months to sell them. In September, there was a 4.9-month supply of homes for sale; a year ago, there was a 5.2-month supply.

It took a median of 54 days to sell a home in October, up from 50 days in September, but well below the 71 days on market in October 2012.

Short sales were on the market for a median of 93 days, while foreclosures typically sold in 46 days, and non-distressed homes took 53 days. Thirty-six percent of homes sold in October were on the market for less than a month.

Who’s Buying Homes?

First-time buyers accounted for 28% of purchases in October, unchanged from September, but down from 31% in October 2012.

All-cash sales comprised 31% of transactions in October, down from 33% in September. Investors, who account for many cash sales, purchased 19% of homes in October, unchanged from September. Last month, two-thirds of investors paid cash.

In markets where homes typically receive multiple offers, first-time homebuyers using mortgages to buy homes are often beat out by investors offering sellers cash.

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