If October sales of existing homes are an indication 2014 may come to a better conclusion than has been expected.  The National Association of Realtors® (NAR) said today that sales of single-family homes, townhomes, condominiums, and co-ops in October were at their highest level since September 2013 and, for the first time in a year, exceeded sales a year earlier.

Existing home sales rose 1.5 percent in October to a seasonally adjusted annual rate of 5.26 million in October, the highest since the same figure was reached in September 2013, from an upwardly revised rate of 5.18 million in September, the second consecutive month-over-month increase.   October's sales were also 2.5 percent higher than in October 2013. 

Lawrence Yun, NAR chief economist, says the housing market this year has been a tale of two halves. "Sales activity in October reached its highest annual pace of the year as buyers continue to be encouraged by interest rates at lows not seen since last summer, improving levels of inventory and stabilizing price growth," he said. "Furthermore, the job market has shown continued strength in the past six months. This bodes well for solid demand to close out the year and the likelihood of additional months of year-over-year sales increases."

Single-family home sales increased 1.3 percent to a seasonally adjusted annual rate of 4.63 million in October from 4.57 million in September, and are now 2.9 percent above the 4.50 million pace a year ago.  Existing condominium and co-op sales rose 3.3 percent to a seasonally adjusted annual rate of 630,000 units in October from 610,000 in September, and were the same as a year earlier.

The median existing-home price for all housing types in October was $208,300, an annual increase of 5.5 percent and the 32nd consecutive month of year-over-year price gains.  The median existing single-family home price rose 5.6 percent from a year earlier to $208,700.  The median existing condo price was $205,400 in October, which is 4.5 percent higher than a year ago.

Housing inventory was down slightly, falling 2.6 percent to 2.22 million existing homes available for sale, up 5.2 percent from 2.11 million homes in October 2013.  The available homes represent a 5.1-month supply at the current sales pace, the lowest monthly supply since last March. 

"The growth in housing supply this year will likely prevent the drastic sales slowdown and coinciding spike in home prices we saw last winter due to low inventory," says Yun. "However, more housing starts are needed to increase supply, meet current demand and keep price growth in check."

Twenty-nine percent of existing home sales were to first time buyers in October, the fourth consecutive month with the same percentage.  The first-time buyer share has been below 30 percent in 18 of the last 19 months and a separate NAR survey found that the annual share of first-time buyer has fallen to its lowest level in nearly three decades.  Individual sales to investors accounted for 15 percent of the market in October and 65 percent of them paid cash.  Cash sales overall accounted for 27 percent of existing home transactions, up from 24 percent in September but down from 31 percent in October of last year.

Seven percent of October sales were foreclosures and 2 percent were short sales.  Total distressed home sales were down one percentage point from September and represented the third time this year that those sales have fallen into the single digits.   Foreclosures sold for an average discount of 15 percent below market value in October (14 percent in September), while short sales were discounted 10 percent (14 percent in September).    

"Although distressed sales are trending downward, there are still areas (such as judicial states Florida, Maryland and New York) plagued by foreclosures, and homeowners faced with the awful choice between a tax bill they are unable to pay and losing their home," says NAR President Chris Polychron.  He said that the NAR was continuing to urge the U.S. House to vote on "The Mortgage Forgiveness Tax Relief Act."   Passage would extend an expired provision that exempts forgiven mortgage debt from being taxed as income. 

A property sold in October was typically on the market for 63 days compared to 56 days in September and 54 days in October 2013.  Short sales were on the market for a median of 150 days in October, while foreclosures sold in 68 days and non-distressed homes took 61 days. Thirty-three percent of homes sold in October were on the market for less than a month.

Regionally, October existing-home sales in the Northeast climbed 2.9 percent to an annual rate of 710,000, and are 4.4 percent above a year ago. The median price in the Northeast was $246,900, which is 1.2 percent above a year ago.

In the Midwest, existing-home sales jumped 5.1 percent to an annual level of 1.24 million in October, and are 2.5 percent higher than October 2013. The median price in the Midwest was $164,100, up 6.8 percent from a year ago.

Existing-home sales in the South increased 2.8 percent to an annual rate of 2.17 million in October, and are now 5.3 percent above October 2013. The median price in the South was $178,000, up 5.1 percent from a year ago.

Existing-home sales in the West declined 5.0 percent to an annual rate of 1.14 million in October, and remain 3.4 percent below a year ago. The median price in the West was $296,800, which is 5.0 percent above October 2013.