(Existing-home sales report updated with additional commentary and stock price movement.)
NEW YORK (
) -- Existing-home sales fell 2.2% in October to a slightly better-than-expected seasonally adjusted annual rate of 4.43 million units, the National Association of Realtors said Tuesday morning.
Economists' consensus call had been for the figure to come in at 4.42 million units, according to consensus estimates listed on
. October's rate of existing-home sales remained 25.9% below year-earlier levels "when sales were surging prior to the
initial deadline for the first-time buyer tax credit," the NAR said. July's rate of 3.84 million homes sold was a
Total housing inventory at the end of last month fell 3.4% to 3.86 million existing homes available for sale, a 10.5-month supply at the current sales pace, the NAR said. That is down from a 10.6-month supply in September and 12.5-month supply in July.
"The housing market is experiencing an uneven recovery, and a temporary foreclosure stoppage in some states is likely to have held back a number of completed sales," said NAR chief economist Lawrence Yun. "Still, sales activity is clearly off the bottom and is attempting to settle into normal sustainable levels. Based on current and improving job market conditions, and from attractive affordability conditions, sales should steadily improve to healthier levels of above 5 million by spring of next year."
The national median existing-home price for all housing types was $170,500 in October, down 0.9% percent from October 2009, the NAR report said. Distressed homes accounted for 34% of sales in October, compared with 35% a month earlier and 30% a year ago.
James Russell, partner and CFO at The Collingwood Group, a Washington-based business advisory firm specializing in the mortgage industry, told
it's a good sign for the housing market and economy that a bulk of October's existing-home purchases were made by investors, not by people who intend to live in the homes.
He said the trend is "encouraging" and "good for America," showing that "there is real interest in real estate" and that investors see long-term value in buying homes at relatively depressed prices today. Still, he conceded that American families continue to be constrained by credit availability and a poor job market.
Doug Roberts, chief investment strategist at Channel Capital Research and author of
Follow the Fed to Investment Success
fewer people applying for mortgage applications in the month and a
decline in the index of pending home sales pointed to the possibility for disappointment in the NAR's data.
remain near all-time lows, likely prompting some potential homebuyers to go ahead with their purchases.
It also prompted investors looking for value propositions, Russell pointed out.
Declining home sales was primarily because of the "foreclosure mess and the seasonal influence of people who don't like to move during the school year," Roberts predicted ahead of the report.
Roberts did point out that differentials do exist in southern U.S. climates -- older retirees looking to move and among homebuilder companies trying to get rid of excess inventory -- but that those factors will have more of an effect on new-homes sales.
Sales of newly built homes are expected to have ticked up to a seasonally adjusted annual rate of 312,000 in October, up from
a rate of 307,000 in September. The Commerce Department report is due out Wednesday morning.
A variety of factors have kept potential buyers from making home purchases in recent months. High unemployment, a lack of credit and the
expiration of federal tax credits for homebuyers are obvious reasons. The recent foreclosure scandal also plays its part.
Just as the subprime mortgage troubles expanded into a total housing market downfall, the latest scandal in the home loan industry has expanded into a nationwide political firing line aimed -- once again -- toward the banks due to
, dubbed "robo-signing."
"People are talking about settlements but we haven't seen anything yet," said Roberts. "We're all waiting with baited breath for a solution."
In the meantime a shadow market of housing inventory looms. Roberts said many homeowners who would like to sell their homes, but don't think a sale is likely under current conditions, are waiting on the sidelines for the housing market to pick up.
That means a shadow inventory of available homes is likely to stay elevated even if the pace of sales picks up, Roberts argued.
Russell said an increase in housing inventory depends on how government policy influences Americans' access to credit. He thinks the Federal Housing Agency (FHA) should allow for an investor loan program, and that the government should encourage lending either through the "proper use of
government-sponsored enterprise" or through banks reenergizing the securities market "with mortgage-backed securities to fuel a resurgence in owner-occupied purchases."
Either way, for homebuilders excess inventory means offering potential buyers extra perks like financing interest-free loans for the first few years, and state-of-the-art kitchens -- ways in which the group can spur sales while maintaining operating margins.
Stocks in the homebuilder sector were mostly lower Tuesday morning despite a
better-than-expected upward revision to third-quarter gross domestic product as investors favored safe-haven investments following reports that North Korea shot artillery fire into South Korean territory.
SPDR S&P Homebuilders
, an exchange-traded fund that tracks the homebuilder sector, was 0.7% lower following the existing-home sales report, off earlier lows, while the
iShares Dow Jones US Home Construction
Among individual builders,
traded 3.2% lower,
SPDR S&P 500
ETF fell 1.2%.
-- Written by Miriam Marcus Reimer in New York.
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