Housing sales slip as inventories, prices increase
By Sue Kirchhoff, USA TODAY
Updated 11/28/2005 11:05 PM
WASHINGTON — Existing home sales declined in October, while inventories and prices jumped, according to a Monday report providing fresh, if mixed, evidence the record housing market is cooling.
The National Association of Realtors said sales of existing single-family homes, co-ops and condominiums declined 2.7% from September to a seasonally adjusted annual rate of 7.09 million units.
The decline would have been larger if not for a spike in sales in such markets as Houston and Baton Rouge that have become magnets for those displaced by recent Gulf Coast hurricanes. Overall, sales were 3.7% above year-ago levels.
The inventory of existing homes for sale jumped 3.5% to 2.87 million. Inventory as a percentage of current sales is now the highest since June 2003. The overall number of units on the market is the largest since April 1986.
Rising inventories haven't yet crimped prices. The national median price for existing homes sold soared to $218,000, a 16.6% gain from October 2004 — and the biggest annual jump since 1979.
Monday's data are the latest in a string of indicators — lower mortgage applications, a decline in new home construction and rising interest rates — signaling a possible turn in the market. Mortgage giant Freddie Mac said the average rate for a 30-year fixed-rate mortgage was 6.07% in October, compared with 5.72% in October 2004.
"Housing activity has peaked and is coming down a bit, and we expect further cooling in the coming months. We feel confident that housing is landing softly as rates continue to rise," says David Lereah, the Realtors' chief economist.
Some economists worry conditions are still too hot, saying the rapid price gains raised the odds of corrections in local markets.
"The more (homes) appreciate, the more the likelihood that we'll see housing bubbles burst and cause problems for the rest of the economy," says Patrick Newport, U.S. economist for Global Insight.
Mike Englund of Action Economics points out that home prices usually decline at a 6% rate in the fourth quarter of the year. By contrast, prices rose slightly in October from September.
The rise in inventories is a possible danger sign that the market is out of whack, but Englund says it could also reflect homeowners' confidence they will be able to sell for near the asking price if they list their homes now.
The Realtors said existing home sales declined 1.2% in the West in October, with the median price up 16.2% from 2004 to $316,000.
Home sales in the South dipped 1.8%, with the median price of $196,000, up 18.1% from a year ago.
In the Midwest, sales declined 1.9%, while prices rose 10.4% from 2004 to $170,000.
Northeast home sales declined 7.4%, while the median price rose 10.5% to $252,000.
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