US home sales rise 2.1 percent in October

WASHINGTON (AP) — U.S. sales of pre­vi­ously occu­pied homes rose solidly in Octo­ber, helped by improve­ment in the job mar­ket and record-low mort­gage rates.

The increase along with a jump in home­builder con­fi­dence this month sug­gests the hous­ing mar­ket con­tin­ues to recover.

The National Asso­ci­a­tion of Real­tors said Mon­day that sales rose 2.1 per­cent to a sea­son­ally adjusted annual rate of 4.79 mil­lion. That’s up from 4.69 mil­lion in Sep­tem­ber, which was revised lower.

The sales pace is roughly 11 per­cent higher than a year ago. But it remains below the more than 5.5 mil­lion that econ­o­mists con­sider con­sis­tent with a healthy market.

As the econ­omy slowly recov­ers, more peo­ple have started look­ing to buy homes or rent apart­ments. Prices are steadily climb­ing, while mort­gage rates have been low all year. At the same time, rents are ris­ing, mak­ing the pur­chase of a single-family home or con­do­minium more attractive.

“Alto­gether, the report is encour­ag­ing,” said Michael Gapen, an econ­o­mist at Bar­clays Cap­i­tal. “Our view is that hous­ing is in a recov­ery phase,” he added, though it will be restrained by lim­ited credit and mod­est job gains.

A sep­a­rate report Mon­day showed con­fi­dence among home­builders rose this month to its high­est level in six and a half years. The increase was dri­ven by strong demand for newly built homes and grow­ing opti­mism about con­di­tions next year.

The National Asso­ci­a­tion of Home Builders/Wells Fargo builder sen­ti­ment index increased to 46, up from 41 in Octo­ber. Read­ings below 50 sug­gest neg­a­tive sen­ti­ment about the hous­ing mar­ket. The index last reached that level in April 2006. Still, the index has been trend­ing higher since Octo­ber 2011, when it stood at 17.

The Real­tors’ group said Super­storm Sandy delayed some sales of pre­vi­ously occu­pied homes in the North­east. Sales fell 1.7 per­cent there, the only region to show a decline. Those sales will likely be com­pleted in future months, the group said.

The median price for pre­vi­ously occu­pied homes increased 11.1 per­cent from a year ago to $178,600, the Real­tors’ said.

A decline in the num­ber of homes avail­able for sale is help­ing push prices higher. There were only 2.14 mil­lion homes avail­able for sale at the end of the month, the low­est sup­ply in 10 years. It would take only 5.4 months to exhaust that sup­ply at the cur­rent sales pace. That’s the low­est sales-to-inventory ratio since Feb­ru­ary 2006.

Prices are also ben­e­fit­ing from the mix of homes being sold. Sales of homes priced at $500,000 and above have jumped more than 40 per­cent in the past year. Sales of homes and con­do­mini­ums that cost less than $100,000 fell 0.6 percent.

There have been other pos­i­tive sig­nals from the hous­ing mar­ket. Appli­ca­tions for mort­gage loans to buy homes jumped 11 per­cent in the week ended Nov. 9, com­pared with a week ear­lier, the Mort­gage Bankers’ Asso­ci­a­tion said last week. Pur­chase appli­ca­tions are up 22 per­cent in the past year.

Fore­clo­sures are slow­ing. The num­ber of prop­er­ties that began the fore­clo­sure process in the first 10 months of the year fell 8 per­cent com­pared with the same period last year, Real­ty­Trac said last week.

And builders broke ground on new homes and apart­ments at the fastest pace in more than four years in Sep­tem­ber. The jump could help boost the econ­omy and hiring.

Still, the mar­ket has a long way back to full health. Many poten­tial home buy­ers can­not meet stricter lend­ing stan­dards or pro­duce larger down pay­ments required by banks.

That can be a par­tic­u­lar prob­lem for first-time home­buy­ers. They accounted for 31 per­cent of sales in Octo­ber, down slightly from Sep­tem­ber and below the 40 per­cent that is com­mon in a healthy market.

Fed­eral Reserve Chair­man Ben Bernanke said Thurs­day that banks’ overly tight lend­ing stan­dards may be pre­vent­ing sales and hold­ing back the U.S. economy.

Posted by Matt Echelberry on Nov 19 2012. You can follow any responses to this entry through the RSS Feed. Both comments and pings are currently closed.