Sales of existing homes fell more than forecast in October as foreclosure moratoriums and a lack of credit disrupted the U.S. housing market.
Purchases declined 2.2%, to a 4.43 million annual rate, from 4.53 million in September, the National Association of Realtors said Tuesday.
Economists had projected that sales would decline to a 4.48 million pace, according to the median forecast in a Bloomberg News survey. The median price fell 0.9% from a year earlier.
An overhang of distressed properties and an unemployment rate hovering near 10% may restrain home sales, and concerns over faulty foreclosure proceedings threaten to further delay a housing recovery. At the same time, mortgage rates near record lows may help limit the damage.
"There are still going to be quite a bit of homes up for sale that have come from foreclosures," said Ryan Wang, an economist at HSBC Securities USA Inc. in New York. "There is little improvement."
Sales estimates from the 71 economists surveyed by Bloomberg ranged from 3.85 million to 4.7 million. In July, sales ran at a 3.84 million annual rate, the weakest month in a decade's worth of record keeping by the Realtors group. Compared with a year earlier, existing-home sales were down 28% before adjusting for seasonal patterns.
Sales last month fell in all four regions of the country, the report said, led by a 3.4% drop in the South. The median price declined to $170,500 last month, from $172,000 in October 2009.
Purchases of single-family homes fell 2%, to a 3.89 million annual rate in October, from a month earlier, the group said.
The number of previously owned homes on the market fell 3.4%, to 3.86 million. At the current sales pace, it would take 10.5 months to sell those houses, compared with 10.6 months in September. Inventory would need to drop to about eight months' supply in order to stabilize home prices, the group has said.
Distressed sales, which include foreclosures and short sales, in which the bank agrees to take less than the full amount owed on a mortgage, accounted for 34% of total sales, about the same as in prior months.
The October drop in sales "may be partly due" to the temporary foreclosure moratoriums, NAR chief economist Lawrence Yun said during a press conference.
A lack of mortgage lending is also preventing buyers from entering the market, offsetting any benefit from lower borrowing costs, he said. The Fed's second round of quantitative easing will probably be "not that meaningful" in pushing interest rates down much more.
Foreclosure moratoriums at JPMorgan Chase & Co. and other big banking companies, along with government investigations into faulty paperwork, threaten to further delay a recovery as houses slated for repossession take longer to come to market.
Foreclosures are mounting because out-of-work Americans cannot make monthly payments and growing numbers of homeowners, seeing their houses' market value slide to less than their mortgage debt, also default.