Existing Home Sales Drop Further-Than-Expected In October

The National Association of Realtors on Tuesday reported that sales of existing US homes in October were lower than forecast as the housing market was held in check by foreclosure moratoriums and strict lending standards.

The NAR’s report showed that sales of existing homes fell 2.2 percent to a seasonally adjusted annual pace of 4.43 million units, compared to a pace of an annual rate of 4.53 million in September. Economists participating in a recent Bloomberg News survey had forecast a median pace of 4.48 million units. The median sales price in October was also down, by .9 percent as compared with October 2009.

Economists are concerned that continued high levels of unemployment and a glut of unsold inventories will restrain sale sin the struggling US housing market, even as mortgage rates at or near historic lows limit the damage. Predictions of the 71 economists surveyed by Bloomberg ranged from 3.85 million to 4.7 million. The pace in July was 3.84 million units, the weakest ever in the ten year history of the NAR homes report.

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A separate report on Tuesday indicated that the overall US economy grew at a 2.5 percent rate in the third quarter as consumer spending and business investment both grew. The figure was revised upward from a 2 percent estimate in October, and compares with a growth rate of 1.7 percent for the US economy in the second quarter. The Commerce Department report also showed that corporate profits grew in the quarter at a slower-than-expected pace.

Stocks remained at lower levels after sustaining earlier losses on mounting tension between North and South Korea, as well as growing concern about the possible spread of the European debt crisis. The S&P 500 fell 1.2 percent to 1,183.04 as of about 10:30 AM ET. Treasury securities edged higher, sending the yield on the benchmark 10-year note down to 2.74 percent from 2.80 percent late Monday.

Without adjusting for seasonal variations, sales of existing homes were down 28 percent from the same time last year. The report showed sales dropped in all four regions, led by a 3.4 percent decline in the South. The median sales price was also down, from $172,000 in October 2009 to $170,500. Sales of existing, single-family units fell 2 percent from a year ago to an annual pace of 3.89 million.

The number of existing US homes on the market fell 3.4 percent to 3.86 million. At the current pace of sales, it would take 10.5 months to exhaust that supply, compared to 10.6 months in September. Economists say that a supply of about 8 months or less would be required to stabilize prices in the struggling housing market.

The percentage of foreclosure sales and other distressed properties was about 34 percent of total sales in the month, about the same level it’s been for a number of months. Economists partially attribute the October drop in sales to foreclosure moratoriums, as well as lenders’ tighter qualifying criteria for borrowers.