As usual the two monthly reports on home sales - existing
homes and newly constructed houses - were issued in lockstep on Wednesday
and Thursday and while one was loudly proclaimed as an indicator that things were
still getting worse, the second contained a germ of hope.
The National Association of Realtors (NAR) issued the results
of its survey of sales of existing homes in October on Wednesday
and the report was gruesome with sales showing the largest drop in month-to-month
figures in eight years. October existing home sales including single family
residences, town houses, condos, and coops were down 1.2 percent to a seasonally
adjusted annual rate of 4.97 million units from the downwardly revised September
figure of 5.03 million. The October figures are 20.7 percent below the 6.27
million units sold in September 2006. (We did double check and NAR was claiming,
in this category, to cite September 2006 not October 2006 figures.)
On a regional basis, existing home sales in the Northeast and the South were
unchanged from September at 900,000 and 2.03 million respectively. When compared
to October 2006 figures, the Northeast was 2.6 percent lower and the South was
down 19.4 percent.
Sales in the Midwest were 1.7 percent below those in September and 16.9 percent
lower than October 2006. In the West sales were down 4.4 percent from September
and 33.1 percent from the level one year ago.
The national median existing price for all housing types was $207,800 last
month, 5.1 percent lower than the $218,900 median one year ago. Prices in the
various regions were down 6.7 percent in the South, 1.6 percent in the Midwest
and 6.9 percent in the West but were up 1.3 percent in the Northeast.
The inventory of existing homes increased 1.9 percent to a total of 4.45 units
available for sale; this is a 10.8 month supply at the current sales pace compared
to 10.4 months in September.
Lawrence Yun, NAR chief economists pointed out that when many
of the sales that closed in October were being negotiated the mortgage problems
arising out of the sub prime situation were peaking. "We continue to see
the biggest impact in high-cost markets that rely on jumbo loans. Mortgage availability
has improved as evidenced by much lower mortgage interest rates and a sharp
jump in FHA endorsements for home purchases.
"A trend away from sub prime mortgages to FHA loans, which often carry
much lower interest rates, is a positive development for consumers and the housing
market going forward. Still, it will take some time for the change to yield
a measurably higher closed sales volume in the aftermath of the sub prime collapse.
In the near term, we expect home sales to remain fairly stable."
Wall Street, in the midst of a 300 plus run-up in the Dow Jones on Wednesday
seemed to take little notice of the NAR figures and perhaps that was prescient
as, on Thursday, the Census Bureau and the U.S. Department of Housing and Urban
Development released their report on sales of new houses for the month of October.
New home sales in October were at a seasonally adjusted annual
rate of 728,000 units which was a 1.7 percent increase above the revised September
figure of 716,000 units although it was 23.6 percent lower than the revised
estimate of 952,000 for October 2006.
A 1.7 percent increase is hardly a rebound; however, there were some bright
notes in the report. First of all, sales in all regions except the West were
in positive territory relative to September with the long-suffering Midwest
up 14.3 percent month-over-month. Three of the four regions were still wallowing
well below October 2006 figures but the Northeast, which had begun its downturn
before the other regions, was up 43.6 percent in terms of October 2007 vs. October
Another positive sign was inventory. In September there was
a 9.0 month supply of new homes for sale nationally, a figure that had dropped
to 8.5 months in October.
Median prices continued to slip, from $238,400 in September to $217,800 in
October but the average price was up from $290,200 to $305,800. These figures
probably reflect the temporary problem with obtaining and closing jumbo loans
that were encountered by buyers/borrowers earlier in the fall. One year ago
the median and mean prices were $250,400 and $306,800 respectively.