Existing home sales fell last month, still above 2010 levels

The housing sector continues to churn out mixed results, and existing home sales are experiencing similar fluctuations, with sales down in September but well above last year. 

Total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, declined 3 percent to a seasonally adjusted annual rate of 4.91 million in September from an upwardly revised 5.06 million in August, the National Association of Realtors (NAR) reported Thursday. 

“Existing-home sales have bounced around this year, staying relatively close to the current level in most months,” said Lawrence Yun, NAR's chief economist.

Sales are up 11.3 percent over the 4.41 million-unit pace in September 2010, but still below the 6 million in sales that economists say signals a healthy market. 

This year is shaping up to produce record-low sales following 4.91 million in 2010, the lowest level since 1997. 

“The irony is affordability conditions have improved to historic highs and more creditworthy borrowers are trying to purchase homes, but the share of contract failures is double the level of September 2010," he said. "Even so, the volume of successful buyers is higher than a year ago and is remaining fairly stable — this speaks to an unfulfilled demand.”

The interest rate for 30-year, conventional, fixed-rate mortgages fell to a record-low 4.11 percent in September, down from 4.27 percent in August. The rate was 4.35 percent in September 2010, Freddie Mac said Thursday. 

Contract failures — cancellations caused by declined mortgage applications, appraised home values coming in below the negotiated price or other problems including home inspections and employment losses, were reported by 18 percent of NAR members in September, unchanged from August. 

They were 9 percent in September 2010. 

A host of other problems are plaguing the housing market's recovery, including tighter credit restrictions and higher requirements for down payments, along with a 9.1 percent unemployment rate. 

“All year we’ve been discussing the fact that many creditworthy homebuyers are being denied mortgages,” said NAR President Ron Phipps. “On top of that, loan limits have been lowered, which means buyers of higher-priced homes, including many in more expensive housing markets, now have to pay a higher interest rate for a jumbo mortgage than buyers who can qualify for a conventional loan. We need to remove the roadblocks to a housing recovery, not place more obstacles in the way of financially qualified buyers.”

Fannie Mae and Freddie Mac started new maximum loan limits on Oct. 1, with the maximum loan amounts dropping from $729,750 to $625,500, making it more difficult to get loans in higher-priced areas. In some cases, loan limits may be as low at $550,000. 

All-cash sales accounted for 30 percent of purchase activity in September, up from 29 percent in August and 29 percent also in September 2010 as investors make up the bulk of cash purchases, NAR said. 

Investors purchased 19 percent of homes in September, down from 22 percent in August. They were 18 percent in September 2010. 

First-time buyers accounted for 32 percent of transactions in September, unchanged from August.

The national median existing-home price for all housing types was $165,400 in September, down 3.5 percent from September 2010. 

Distressed homes — foreclosures and short sales typically sold at deep discounts — accounted for 30 percent of sales in September (18 percent were foreclosures and 12 percent were short sales), down from 31 percent in August and 35 percent in September 2010.

Total housing inventory at the end of September declined 2 percent to 3.48 million, a 8.5-month supply at the current sales pace, compared with an 8.4-month supply in August.

Single-family home sales fell 3.6 percent to a seasonally adjusted annual rate of 4.33 million in September from 4.49 million in August, but are 12.2 percent above the 3.86 million-unit level in September 2010. 

The median existing single-family home price was $165,600 in September, down 3.9 percent from a year ago.

Existing condominium and co-op sales rose 1.8 percent to a seasonally adjusted annual rate of 580,000 in September from 570,000 in August, and are 5.6 percent above the 549,000-unit pace one year ago. 

Regionally, sales in the Northeast rose 2.6 percent but slipped 0.9 percent in the Midwest and 2.6 percent in the South and fell the most, 8.8 percent, in the West.

“The falloff in Western sales from a surge in August was expected because many lenders had lowered mortgage loan limits over concerns that sales wouldn’t close before the higher loan limits expired at the end of the September,” Yun said. “Given the concentration of higher-cost housing in the West, particularly in California, many buyers were motivated to close in the months leading up to the changeover while they could still get low interest rates on conventional mortgages. Unless Congress reinstates the higher limits, the overall housing market recovery will be slower than it otherwise could be, and will hold back the broader economic recovery.”