Existing Home Sales Slip in September, Prices Up Year-over-Year

By: Mark Lieberman, Five Star Institute Economist 10/19/2012

The housing sector hit a speed bump in September as existing home sales dipped, the National Association of Realtors revealed Friday. The NAR reported existing home sales fell 1.7 percent to a seasonally adjusted annual rate of 4.75 million, the first decline in three months.

The median price of an existing home dipped 0.5 percent or $1,000 from August to $183,900, but is up 11.3 percent or $18,600, from September 2011, the strongest year-year dollar increase since January 2006.

Economists had expected existing home sales in September to drop to a seasonally adjusted annual rate of 4.75 million from the upwardly revised rate of 4.83 million homes sold in August.

The pending home sales index for July–which would have led to the September closings reported Friday–had risen to 101.9 from 99.3 in June. Pending home sales reflect contracts signed while the report today is based on completed transactions.

The report followed two strong data reports earlier this week: a continued increase in the Housing Market Index measuring builder confidence and a sharp jump in new residential permits and starts for September.

Unlike the government report on new home sales, which tracks contracts, the NAR report is based on closings, which means this report, though labeled “September,” actually reflects economic conditions in July when contracts were signed.

The NAR chose to focus on the year-year increase in prices–the seventh consecutive month of annual price increases. The last time prices have risen year-year for seven straight months, NAR said, was from November 2005 through May 2006.

Distressed homes-foreclosures and short sales sold at deep discounts-accounted for 24 percent of September sales (13 percent were foreclosures and 11 percent were short sales), up from 22 percent in August; they were 30 percent in September 2011, the NAR said. Foreclosures sold for an average discount of 21 percent below market value in August, while short sales were discounted 13 percent.

Total inventory–homes available for sale–slipped in September to 2.32 million, below 2.4 million for the first time since March. With the sales rate, the months’ supply of existing homes slipped to 5.9, the lowest since March 2006. The listed inventory is about 20 percent below levels one year ago when there were 2.9 million homes for sale.

“The shrinkage in housing supply is supporting ongoing price growth, a pattern that could accelerate unless home builders robustly ramp up production,” according to NAR Chief Economist Lawrence Yun said.

But realtors still face a “shadow inventory” of homes which would be offered for sale if prices or other market conditions improved.

Home sales fell month-month in three of the four Census regions, improving only in the South, where they rose 0.5 percent to 1.93 million.

Sales fell 6.3 percent in the Northeast to 590,000, 3.4 percent in the West to 1.13 million and 0.9 percent in the Midwest to 1.10 million. On an annual basis, sales rose 11 percent nationally and in all four Census Regions.

Year-year sales were up 19.6 percent in the Midwest, 14.2 percent in the South, 7.3 percent in the Northeast and 0.9 percent in the West.

The median price of an existing home rose in all regions, led by an 18.4 percent year-year gain in the West, 13.1 percent in the South, 7 percent in the Midwest, and 4.1 percent in the Northeast.

The median price of a home in the Northeast slipped below the price in the West. In August, prices in the Northeast were higher than those in the West.

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