Housing Bubble
Exisitng homes sales rise in October
Data released today by the National Association of Realtors® indicate that sales of existing single-family homes rose to unusually high levels last month. The figures were described by the NAR as a demonstration of the underlying strength of the housing market.
Existing-home sales increased 6.1 percent in October to a seasonally adjusted annual rate* of 5.77 million units from an upwardly revised level of 5.44 million units in September. Last month's sales activity was 9.5 percent above the 5.27-million unit pace in October 2001 and was tied for the third-highest pace on record.
David Lereah, NAR's chief economist, said a couple factors are at play. "Obviously, historical lows in mortgage interest rates in recent months are a big stimulus," he said. "At the same time, the inventory of homes on the market, which was historically lean during the first half of the year and limited housing choices, improved in August and September. This means there were greater opportunities for buyers to find homes that meet their needs."
"Since it takes some time between purchase offers and transaction closings, what we're seeing now is the result of a better combination of conditions that began in August and improved through September," Lereah said.
Housing inventory levels at the end of October slipped 2.6 percent from September to a total of 2.23 million existing homes available for sale, which represents a 4.6-month supply at the current sales pace, down from a 5.1-month supply in both August and September. During the first half of 2002, inventories averaged a 4.6-month supply; a 6.0-month supply is considered to be a generally balanced market between buyers and sellers.
NAR President Cathy Whatley said the interest-rate picture remains bright. "In recent weeks, the 30-year fixed-rate mortgage has moved lower, briefly dipping below 6.0 percent. Right now there's very little pressure on interest rates to move much higher, so we'll have favorable affordability conditions for some time to come," she said.
According to Freddie Mac, the average commitment rate on a 30-year conventional fixed-rate mortgage was 6.11 percent in October, up marginally from a record monthly low of 6.09 percent in September; it was 6.62 percent in October 2001.
The national median existing-home price was $159,600 in October, up 9.8 percent from October 2001 when the median price was $145,400. This is the largest price gain since July 1987 when the median price rose 10.5 percent above a year earlier. The median is the midpoint, which is a typical market price where half of the homes sold for more and half sold for less.
Regionally, existing-home sales in the Northeast rose 7.9 percent in October to a pace of 680,000 units, and were 4.6 percent above October 2001. The median existing-home price in the Northeast was $165,000, up 14.1 percent from a year ago. Home resale activity in the West rose 7.1 percent from September to an annual rate of 1.50 million units in October, and was 11.1 percent above the same month a year earlier. The median existing-home price in the West was $214,000, up 8.5 percent from October 2001.
The existing-home sales pace in the South rose 5.5 percent in October to an annual rate of 2.31 million units, and were 10.0 percent above October 2001. The median price of an existing home in the South was $148,800, which was 9.7 percent higher than a year ago.
In the Midwest, homes were reselling at an annual rate of 1.27 million units in October, up 4.1 percent from September, and were 7.6 percent above a year ago. The median price in the Midwest was $138,500, up 10.8 percent from October 2001.
The next highest rise was in Nebraska, where existing-home sales improved by 7.1 percent, followed by Kansas, where sales activity was up 7.0 percent from the third quarter of 2001.
The South recorded a sales rate of 2.60 million units in the third quarter, up 3.6 percent from a year ago. After Arkansas, the strongest increase in the region was in Alabama where the resale pace was 17.4 percent higher than the third quarter of 2001. North Carolina experienced a 7.9 percent increase, while Georgia was up 7.3 percent during the same time frame.
The West, with a resale rate of 1.59 million units, was 2.3 percent above the third quarter of 2001. After Hawaii and Nevada, the next highest increase was in New Mexico, where total existing-home sales rose 11.7 percent from a year ago. Montana experienced a 9.3 increase from the third quarter of 2001.
In the Northeast, the total existing-home sales pace of 753,000 units in the third quarter slipped 3.0 percent from a year ago. Vermont resale activity rose 5.5 percent from the third quarter of 2001, Connecticut increased 2.9 percent in the last year, while New Jersey's pace was up by 1.5 percent.
* The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns.
