U.S. Home Sales Dip 1.7% on Tight Inventory

Home salesWASHINGTON (AP) - U.S. sales of previously occupied homes fell in September after hitting a two-year high in August, in part because there were fewer homes available for sale.

The National Association of Realtors said Friday that sales dipped 1.7 percent to a seasonally adjusted annual rate of 4.75 million. That's down from a rate of 4.83 million in August, which was the highest in more than two years.

Sales are still up 11 percent from a year earlier. They remain below the more than 5.5 million that economists consider consistent with a healthy market.

Still, the housing market is recovering after a six-year slump. Economists expect sales will rebound in October, noting that mortgage applications have picked up after falling in August.

"We view the dip (in sales) as a pause in an otherwise improving trend," Jonathan Basile, an economist at Credit Suisse, said in an email to clients.

Sales have improved from last year, helped by record-low mortgage rates and steady gains in home prices in most metro areas. Home prices are more stable because there are fewer foreclosures and a low supply of homes has some markets more competitive.

The inventory of homes for sale fell in September to 2.32 million. It would take 5.9 months to exhaust the supply at the current sales pace, the lowest sales-to-inventory ratio since March 2006.

Economists noted that rising prices could spur more homeowners to put their homes on the market, which could fuel more sales.

"Persistent news of rising home prices should help the recovery...as selling conditions continue to improve and sellers become more confident they can get bids closer to the price they are offering," Basile said.

Sales rose slightly in the South last month, compared to August. They fell in all other regions. In the past year, sales have risen at a healthy pace in the Northeast, South and Midwest. They have risen only slightly in the West, where inventories are particularly tight.

The market is still being constrained by tougher lending standards. Many would-be buyers, particularly first-time buyers, are having difficulty qualifying for a mortgage or can't afford the larger down payments that many lenders want.

A low supply of previously occupied homes has also given a boost to the new-home market.

Builders broke ground on homes and apartments at the fastest pace in more than four years last month. The jump could help boost the economy and hiring. Still, the pace of construction is roughly half of what is associated with a healthy market, and new-home sales are coming off depressed levels.

Builders are more confident because they are seeing more prospective buyers visit properties. The National Association of Home Builders/Wells Fargo (WFC) builder sentiment index, released Tuesday, rose this month to the highest level in more than six years.

There are also signs that the economy is improving. Retail sales rose at a solid pace in September, reflecting growing confidence among consumers. A measure of consumer confidence released last week reached a five-year high.

A recent report from data provider CoreLogic showed that the so-called "shadow" inventory of homes fell 10 percent in July compared with a year ago. The shadow inventory consists of homes in foreclosure or with seriously delinquent mortgages.

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October 21 2012 at 12:10 PM Report abuse rate up rate down Reply

This story is sadly misleading. Hope it was not intentional. Tight inventory needs to be explained. Yes, saleable, desirable housing has almost been cleared up. But that does not mean the general inventory is down or does it take in to account the phantom inventory. Starting this spring, folks who are not in trouble with their debt, have good jobs, and financial wherewithal finally got off their duffs, and decided to make a move. Happened all price ranges, but big part of the action was higher ranges. Couple A who bought their house for $250,000 in 2001, paid 20% down and took out a 15 year mortgage were looking at a house value to maybe $400,000 in 2006. Add they did not milk the equity out. Now they are looking at $300,000. But that is not a problem for them since they only owe around $160,000. So they bit the bullet on the paper loss and went out and bought a house that was worth $550,000 in 2006 that they can buy today for $425,000. There are only so many of them. They came, they bought, they are gone.


October 19 2012 at 2:56 PM Report abuse rate up rate down Reply