U.S. September Existing Home Sales Hold at 7.28 Million Rate
U.S. September Existing Home Sales Hold at 7.28 Million Rate
Oct. 25 (Bloomberg) -- U.S. sales of previously owned homes were unchanged in September from a month earlier, matching the second-highest level on record and suggesting the recent rise in mortgage rates has yet to slow demand.
Existing home sales of 7.28 million at an annual rate were second only to a 7.35 million pace in June, the National Association of Realtors said today in Washington. The median price of a previously owned home rose 13.4 percent from the same month last year to $212,000.
Thirty-year fixed mortgage rates within a percentage point of a four-decade low are helping to blunt higher home prices this year that have caused housing affordability to plunge to a 14-year low. Sales of new and previously owned homes probably will reach a record this year and then slow in 2006, economists and the National Association of Realtors forecast.
``For the last few months or so sales seem to have flattened out,'' Kevin Logan, senior market economist in New York at Dresdner Kleinwort Wasserstein, said before the report. ``This may be the beginning of a sideways movement. The rise in short-term interest rates and higher prices tend to slow down the turnover of houses.''
Economists expected the sales rate to fall to 7.2 million last month, from the originally reported 7.29 million for August, according to the median of 51 forecasts in a Bloomberg News survey. Estimates ranged from 6.93 million to 7.4 million.
Sales were up in two of the four regions. They rose 3.7 percent in the South to a 2.83 million-unit pace and 0.8 percent in the Northeast to 1.21 million.
Katrina
David Lereah, chief economist at the Realtors group, said September sales were boosted by increased purchases in areas around New Orleans. Hurricane Katrina washed ashore the U.S. Gulf Coast on Aug. 29.
``We are now getting some hard data from this region, with spot checks showing sharply higher home sales to residents who were displaced by the hurricane,'' Lereah said. ``The sales surge is more than offsetting declines in the disaster zone.''
Sales fell 4.1 percent in the West to 1.62 million and 3 percent in the Midwest to 1.61 million.
In August, the median selling price of an existing home was a record $220,000, a 16 percent increase that was the biggest gain since July 1979.
The average rate on a 30-year fixed mortgage was 5.77 percent in September, according to Freddie Mac, the No. 2 purchaser of home loans. While down from August's average 5.82 percent, rates have increased in each of the past six weeks, to 6.10 percent last week, the highest in more than a year.
Employment
``As long as the employment picture remains good and interest rates remain in a lower fashion, as they have right now,'' Bill Emerson, chief executive of Quicken Loans Inc., said in an interview on Oct. 19. ``As long as those two factors remain in play, I think you're going to see a lot of demand in terms of buying homes or refinancing.''
Resales, which account for about 85 percent of the residential real estate market, are tabulated at contract closings so they reflect buying decisions made a month or two earlier. Purchases of new homes are counted when a contract is first signed, making them a better gauge of current activity, economists said.
Higher mortgage rates and rising home prices are likely to ``have a slight braking action'' on housing next year, National Association of Realtors President Al Mansell said in a statement on Oct. 12. ``As a result, there should be a cooling in the rate of price growth.''
The Realtors group forecasts previously owned home sales this year to reach a record 7.1 million this year and 6.86 million in 2006. Sales of new homes will total 1.29 million, also an all-time high, the group estimates. The Commerce Department is scheduled to release the September new home sales report on Oct. 27.
Single-Family Homes
Sales of single-family previously owned homes rose 0.6 percent to a 6.38 million annual pace in September, the Realtors group said. Sales of condos and co-ops fell 4.7 percent to an 898,000 rate.
The supply of existing homes available for sale, another gauge of housing demand, held at 4.7 months' worth in September, the highest since November 2003.
Even before the slowing effects of the hurricanes, reports were suggesting home sales rates will slow because of higher interest rates and prices.
The average household had 120.8 percent of the income needed to purchase a property with a median home price of $208,500 in the second quarter, the National Association of Realtors said on Aug. 3. That level was the lowest since the third quarter of 1991, when it was 113.7 percent.
Guynn
``I have been saying for more than a year that the pace of building and the pace of price appreciation in some local markets, particularly some of the coastal Florida markets, looked very unsustainable to me,'' Federal Reserve Bank of Atlanta President Jack Guynn said after a speech in Atlanta on Oct. 20. ``My sense from talking to developers and bankers who have been financing some of the construction of some of those projects is there has been at least a modest pullback from the froth that I have been sensing for quite a while now.''
The housing market has been a major driver of economic growth in the U.S. the past few years. That influence probably will diminish as sales slow, economists said.
Economic growth this quarter may slow to a 3.1 percent annual pace as higher fuel costs result in consumers spending less on other goods and services, economists said in a Bloomberg News survey from Oct. 3 through Oct. 10. Economists took down their forecasts for the economy for the second half of the year after Hurricanes Katrina and Rita hit the Gulf Coast, disabling oil and gas production and causing prices to rise.
To contact the report on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net
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