The National Association of Realtors® reported a decline in existing home sales in October, down for the second straight month. The number of existing home sales fell from an annualized 5.39 million in July and August to 5.29 million in September to 5.12 million in October. This was largely expected given higher borrowing costs and the rush of closings in the summer months.
Still, even with recent declines, the sector remains healthier today than in recent years, with year-over-year growth of 6.0 percent and median home prices up 12.8 percent since October 2012. Moreover, there continue to be 5.0 months of supply on the market, which suggests a decent level of inventory even as it could definitely be higher.
Increased mortgage rates help to explain much of the slowdown in sales growth for existing homes. In July and August, when existing home sales were at a six-year high at 5.39 million annualized units, the average 30-year mortgage peaked at 4.58 percent, according to Freddie Mac. This caused many existing home buyers to push through closings to try to lock in rates before they moved higher. Since the Federal Reserve chose not to taper its asset purchases at its September meeting, mortgage rates have settled lower. The average 30-year mortgage rate last week was 4.35 percent.
Interestingly, the pace of existing home sales for October nearly matched the average year-to-date rate for 2013, with an average of 5.119 million units sold through the first 10 months of the year. That figure is up 9.8 percent from the average of 4.661 million units sold in all of 2012.
Chad Moutray is the chief economist, National Association of Manufacturers.