Home Resales Drop

The Wall Street Journal

20 October 2011

Sales of previously occupied homes in the U.S. fell slightly last month, a sign of continuing weakness in a depressed part of the economy.

Existing-home sales decreased by 3.0% in September from a month earlier to a seasonally adjusted annual rate of 4.91 million, the National Association of Realtors said Thursday. August’s sales pace was revised upward to 5.06 million per year.

Economists surveyed by Dow Jones Newswires had expected home sales to fall by 2.6% to an annual rate of 4.90 million.

The market is “in a holding pattern. It’s not breaking out,” said Lawrence Yun, the trade group’s chief economist.

Sales were up 11.3% from the same month a year earlier. The median sales price was $165,400, down 3.5% from $171,400 a year earlier.

The inventory of previously owned homes listed for sale, meanwhile, fell at the end of September to 3.48 million. That represented an 8.5-month supply at the current sales pace, compared with a healthy level of about six months. Foreclosures and other distressed properties represented about 30% of sales, the Realtors group said.

More than five years after the housing bubble started to burst,the housing market remains a heavy burden on the economy.

A massive supply of foreclosed properties and a shortage of buyers who are able to purchase a home amid tight lending standards are holding down prices in much of the country.

Meanwhile, consumers remain uncertain about whether the market will take another turn for the worse and are hesitant about making a big purchase. Mortgage lending for home purchases was at the lowest point in nearly 15 years last week, despite mortgage rates that have been hovering above record lows, the Mortgage Bankers Association said Wednesday.

With the market struggling, home builders have stayed away from the single-family market. While overall home building grew in September to the highest level in 17 months, the jump came largely from construction of multifamily homes, the Commerce Department said Wednesday.

The housing market in many parts of the country has been facing renewed pressure this fall, now that the maximum size of loans that can be backed by government controlled mortgage companies Fannie Mae, Freddie Mac and the Federal Housing Administration has fallen. The limits, which went into effect at the start of this month, vary by location but are now $625,500 in expensive markets such as New York and San Francisco, down from $729,750.

Senate lawmakers, especially ones from high-cost markets on the East and West coasts, have been pushing to restore the former limits — a move strongly backed by the Realtors group.

The Realtors group conducted a survey of about 1,300 real estate agents in nearly 670 counties affected by the change. It found that 16% of potential buyers dropped out of the home buying process due to the loan limit change.

Many of those borrowers can’t afford higher down payments that are required for loans that don’t receive government backing, Yun said.

The Realtors’ report said home sales fell last month compared with a month earlier in three out of four regions. Sales were down 8.8% in the West, 2.6% in the South and 0.9% in the Midwest. Sales rose 2.6% in the Northeast.