The consensus of economists surveyed by Bloomberg News had been for October existing home sales to come in at a 5.7 million unit annualized rate. The annualized existing sales number for September was revised to a 5.54 million units, and for August to 5.1 million units. Existing home sales are also up 23.5% in the past 12 months.
Meanwhile, inventories of existing homes also fell 3.7% in October to a seven-month supply at the current sales pace, down from a revised eight-month supply in September. Inventories have fallen about 15% in the past year. Economists say a healthy, normal existing home sale market has a three- to five-month supply of homes available for sale.
A Pleasant October Surprise
Lawrence Yun, chief economist for the National Association of Realtors, says he's surprised at the size of the October sales gain. "Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November," Yun says in a statement. "With such a sales spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer."
Earlier this fall, Congress extended the $8,000 tax credit for first-time buyers, who now have until April 30, 2010, to sign a home purchase contract to qualify.
In addition, the U.S. median home price for all types of housing fell to $173,100 in October, down 7.1% in the past 12 months. Still, that's a smaller year-over-year price decline than the 8.5% drop recorded in September. Further, the median sale price for a single-family home fell 6.8% to $173,100; condos declined 10.4% to $172,900.
Economists and market analysts follow the monthly existing home sales statistic closely because previously owned homes account for the bulk of U.S. home sales. Moreover, these professionals follow U.S. housing activity because the sector does not operate in a vacuum. When homes are purchased, homeowners tend to buy durable goods and big-ticket items for their new homes: furniture, appliances, landscaping equipment, home-care supplies, etc. -- an uptrend in each of which is good news for the economy and bullish for U.S. stock markets.
By region, in October existing home sales increased 11.6% in the Northeast, where the median price fell 2.6% to $235,400 compared to a year ago; sales surged 14.4% in the Midwest, where the median price gained 1.1% to $147,600; in the South, sales rose 12.7%, with the median price dropping 6.3% to $151,100; in the West, sales rose 1.6%, with the median price plunging 14.7% to $220,200.
Housing Analysis
October was another good month for existing homes sales, and the housing sector recovery story remains in place. Two key takeaways from the month's data: Inventories plunged again, down one month's worth of sales, to a seven-month supply at the current sales sales. If that trend continues, supplies could reach normal levels in about a half a year. Second, the price decline of homes appears to be moderating, although the trend varies by region: The Midwest actually registered a year-over-year price gain, up 1.1%, in October. (There's even some sporadic, regional evidence of homes receiving multiple bids.) Provided sales continue to rise, sopping up excess supply, housing should provide a modest tailwind to the U.S. economy in 2010.
