Existing home sales for October pick up to an unexpected one-year high
The US housing market got a few pieces of good news this week. The latest? The pace of Americans buying pre-owned homes hit a one-year high last month.
Existing home sales picked up 1.5 percent to a 5.26 million annualized pace in October, according to data released Thursday by the National Association of Realtors (NAR). Analysts had been expecting sales to fall to a 5.16 million pace, from a revised 5.18 million in September. It was the fastest rate for existing home sales since September 2013, representing a 2.5 percent gain from October of last year.
鈥淭he October result was above what was suggested by the September pending existing聽home聽sales, which had indicated little change in actual聽sales聽relative to their September pace,鈥� Joshua Shapiro, an economist with MFR, Inc., writes via e-mailed analysis.
Buyers 鈥渃ontinue to be encouraged by interest rates at lows not seen since last summer, improving levels of inventory and stabilizing price growth,鈥� NAR's chief economist says in the organization鈥檚 release of the October data. 鈥淔urthermore, the job market has shown continued strength in the past six months. This bodes well for solid demand to close out the year and the likelihood of additional months of year-over-year sales increases.鈥澛�
The report comes on the heels of two hopeful signs for the housing market earlier this week. Home-builder confidence has seen a healthy increase this month, thanks to continued low interest rates and a boost in buyer traffic, according to data released Tuesday by the National Association of Home Builders (NAHB). 聽And housing starts, a strong indicator of future home purchases, fell 2.8 percent in October from September. However, the dip was due to a plunge in the volatile multifamily home sector. Starts on single family homes, which make up two thirds of the overall market, increased 4.2 percent to reach their highest pace since聽 November of last year.
鈥淪ingle-family building permits are the figures to watch here, and they did not disappoint in October,鈥� IHS Global Insight economists Patrick Newport and Stephanie Karol wrote Wednesday in an e-mailed report. 鈥淗owever, only one region of the country (the South) seems to be digging itself out of the rut that all regions have been stuck in since the end of 2012. All other regions continue to move sideways 鈥� a worrying trend.鈥�
There were concerns on the existing sales front as well. The percentage of first-time buyers went unchanged at 29 percent, while the share of all-cash buyers and investors increased to 27 percent and 5 percent, respectively. A strong market has a small share of such buyers and a more robust market for families and first-time buyers.
Still, analysts are hopeful that sales gains will continue in the near term. 鈥淥ur virtuous cycle spins on for single-family homes,鈥� Mr. Newport and Ms. Karol wrote in a Thursday report. 鈥淵early price growth looks stable and positive. Current market conditions are unlocking a strong demand for existing single-family homes;聽the affordability index rose 4.5 percent month-on-month in September (i.e. homes were more affordable), granting buyers the additional purchasing power they need to keep bidding prices up鈥�. Mortgage rates have fallen since the end of September, which has helped to spur an uptick in purchase applications over the past three weeks. This should translate into increased sales over the course of the next two months, since home sales are recorded when the transaction has finalized. We therefore expect that sales rates should continue to advance as the year draws to a close.鈥�
