Existing home sales beat expectations with 10% rise

Tax credit cited as key reason for gains in October

Sales of existing US homes increased more than forecast in October to the highest level since February 2007, spurred in part by a tax credit that lured first-time buyers.

Purchases rose 10.1 per cent to a 6.1 million annual rate from a 5.54 million pace in September, the National Association of Realtors said yesterday. The median sales price decreased 7.1 per cent from October 2008, the smallest decline in more than a year.

Cheaper homes and stimulus such as the US$8,000 incentive, extended and expanded by the Obama administration this month, have revived an ailing housing market that contributed to the worst economic slump since the Great Depression. Further improvement that would aid the economy’s recovery depends on an easing in unemployment and foreclosures.

‘We’ve turned the corner,’ John Herrmann, president of Herrmann Forecasting in Summit, New Jersey, said before the report. ‘A pick-up in sales is helping builders to burn through the inventory. It’ll still be a gradual recovery.’

Existing home sales were forecast to rise to a 5.7 million annual rate, according to the median forecast of 66 economists in a Bloomberg News survey. Estimates ranged from 5.2 million to 6 million, after an initially reported 5.57 million rate in September.

Sales had reached a 4.49 million pace in January, their lowest level since comparable records began in 1999.

Purchases of existing homes rose 23.5 per cent in October compared with a year earlier. The median price fell 7.1 per cent from a year ago to US$173,100.

The number of previously-owned unsold homes on the market fell 3.7 per cent to 3.57 million. At the current sales pace, it would take seven months to sell those houses compared with eight months at the end of the prior month. The months’ supply is the lowest since February 2007.

The share of homes sold as foreclosures or otherwise distressed properties rose to 30 per cent from 29 per cent in September, NAR chief economist Lawrence Yun said in a press conference yesterday.

The report showed sales of existing single-family homes rose 9.7 per cent to an annual rate of 5.33 million. Sales of condos and co-ops increased 13.2 per cent to a 770,000 rate.

Purchases rose 11.6 per cent in the Northeast, 14.4 per cent in the Midwest, 12.7 per cent in the South and 1.6 per cent in the West.

Sales of previously owned homes, which make up more than 90 per cent of the market, are compiled from contract closings and may reflect purchases agreed upon weeks or months earlier. Many economists consider new-home sales, recorded when a contract is signed, a more timely barometer.

Source: Business Times, 24 Nov 2009