Existing-Home Sales Pace Slows

Sales of existing homes eased in October and inventories rose to their highest levels in years, but the national median price still rose 16.6% from a year earlier, the National Association of Realtors said Monday.

Total existing-home sales were at a seasonally adjusted annual rate of 7.09 million units in October, down 2.7% from September's pace of 7.29 million, but 3.7% above the 6.84 million-unit rate a year ago. Economists expected a 7.20 million annual rate for October, according to Reuters.

The annual rate for a month represents what the total number of actual sales for a year would be if the pace for that month were maintained for 12 consecutive months. The rates are adjusted to factor out seasonal variations in resale activity for each month.

The national median existing home price for all housing types rose to $218,000 in October from $187,000 a year ago. The October median price was the second-highest monthly level of the year, after the $220,000 median price in August.

Housing inventories, meanwhile, jumped to 2.87 million units, representing 4.9 months of supply at the current sales pace.

"One thing to note is that prices continue to rise even as month's supply rises," said Phillip Neuhart, economic analyst with Wachovia. "So higher inventories are not depressing prices."

Neuhart said that as long as sales can keep pace with the higher months of supply, prices will be able to maintain their current levels.

Wachovia economists expect existing home sales to total 7.05 million units this year and expect a drop of 3% to 5% in 2006.

David Lereah, NAR's chief economist, says markets are getting into better balance between demand and supply.

"We are returning to more balanced markets between home buyers and sellers, one that places buyers on a more even footing," Lereah said in a statement. "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."

Homebuilder stocks fell on the news. Brookfield Homes (BHS) fell $1.46, or 2.8%, to $50.10; Pulte Homes (PHM) fell $1.10, or 2.5%, to $42.10; and Ryland (RYL) shed $2.44, or 3.2%, to $73.93 in Monday morning trading.

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