November 23rd, 2011 7:55 AM by Lehel S.
Sales of previously owned homes got an unexpected boost last month while the number of homes on the market continued to decline, according to data released Monday by the National Association of Realtors (NAR).
The trade group recorded a 1.4 percent month-over-month increase in existing-home sales in October, pushing the annual rate of sales to 4.97 million. NAR’s latest reading is 13.5 percent above the 4.38 million-unit sales pace in October 2010.
Housing inventory fell 2.2 percent to 3.33 million existing homes available for sale as of the end of October, which represents an 8.0-month supply.
That’s down from an 8.3-month supply in September.NAR says the housing supply has been trending gradually down since setting a record of 4.58 million in July 2008.
Distressed homes – foreclosed REOs and short sales – slipped to 28 percent of October’s transactions, down from 30 percent in September. They were 34 percent in October 2010.
NAR says 17 percent of last month’s existing-home sales were foreclosures and 11 percent were short sales.
Market analysts were expecting up to a 3 percent drop in overall existing-home sales between September and October. Forecasts ranged between an annual rate of 4.76 million and 4.80 million.
According to NAR, October home sales should have risen higher than the 1.4 percent the trade group recorded.
According to Lawrence Yun, NAR’s chief economist, contract failures reported by Realtors jumped to 33 percent in October from 18 percent in September. Only 8 percent of contracts fell through in October of last year.
“A higher rate of contract failures has held back a sales recovery,” Yun said. “Home sales have been stuck in a narrow range despite several improving factors that generally lead to higher home sales such as job creation, rising rents, and high affordability conditions. Many people who are attempting to buy homes are thwarted in the process.”
NAR’s report shows the national median existing-home price was $162,500 in October, which is 4.7 percent below October 2010.
“In some areas we’re hearing about shortages of foreclosure inventory in the lower price ranges with multiple bidding on the more desirable properties,” Yun said. “Realtors in such areas are calling for a faster process of getting foreclosure inventory into the market because they have ready buyers.”
Yun adds that extending credit to responsible investors would help to absorb distressed inventory at an even faster pace, which he says “would go a long way toward restoring market balance.”
NAR’s data indicates investors purchased 18 percent of homes in October, while first-time buyers accounted for 34 percent of transactions. All-cash sales made up 29 percent of last month’s purchases.