Sales of previously owned homes in the U.S. unexpectedly rose in October, a sign falling prices may be attracting buyers.
Purchases increased 1.4%, to a 4.97 million annual rate, the National Association of Realtors said Monday in Washington. The median house price dropped by 4.7 % from a year earlier, and the number of properties for sale was the lowest for any October since 2005.
Borrowing costs near a record low are helping homebuyers take advantage of housing that’s growing more affordable as prices drop. At the same time, the end of a temporary halt on foreclosures may push more properties onto the market, triggering further slides in value that may prevent the industry from recovering for years.
“The housing market is stabilizing, but it has a long road to a full recovery,” said Sal Guatieri, a senior U.S. economist at BMO Capital Markets in Toronto.
“There are still a lot of depressed properties in the pipeline that will hit the market,” Guatieri said, “and demand likely needs to strengthen above a 5 million annual rate to absorb the overhang of unsold homes and alleviate the downward pressure on prices.”
Sales of existing homes, tabulated when a contract closes, rose 12% from the same month last year before adjusting for seasonal variations. Total sales in 2010 were 4.9 million, compared with a peak of 7.07 million in 2005 during the boom.
The number of previously owned homes on the market dropped to 3.33 million last month, the fewest since January 2010. At the current sales pace it would take eight months to sell those houses, versus 8.3 months at the end of September. A range of seven months to eight months supply is consistent with stable home prices, the Realtor group has said. “Maybe we are very close” to seeing home prices stabilize, Lawrence Yun, the group’s chief economist, said in a news conference Monday.
Sales increased even as 33% of the group’s members reported having problems with contracts or cancellations in October, jumping from 18% the prior month, Yun said. The surge last month was not easily explained, he said, citing changes to conforming loan limits in September and “consistent frustration” over the loan approval process for short sales as possible explanations.
Of all purchases, cash transactions accounted for about 29%, compared with 30% in September. Distressed sales, which are made up of foreclosures and short sales in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 28% of the total in October.
The median price of a previously owned home decreased to $162,500 from $170,600 in October 2010, Monday’s report showed.
