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Declining affordability, government shutdown are slowing home sales

Declining affordability, government shutdown are slowing home sales
The widely followed S&P/Case-Shiller index of home prices in 20 large U.S. metropolitan areas fell 0.1% in December from November, the second straight month-over-month drop. (Jim Watson / AFP/Getty Images)

Sales of previously owned homes fell in September, as declining affordability hampered demand, a trade group said.

Existing sales of single-family houses, town homes, condominiums and co-ops dropped 1.9% from August to a seasonally adjusted annual rate of 5.29 million, the National Assn. of Realtors said Monday.

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Higher mortgage rates, slow income growth and rapidly rising home prices helped drive sales downward last month, said Lawrence Yun, the association's chief economist. Still, sales remain 10.7% higher than September 2012.

Sales fell from August in the Northeast, Midwest and South. In the West, buyers purchased 1.6% more homes in September.

The national median home price rose 11.7% from last year to $199,200 in September--the 10th straight month of double-digit yearly increases, the Realtors group said.

"Affordability is a serious concern for many would-be homeowners, and rising flood insurance rates are another roadblock to making the purchase," IHS Global Insight economists Stephanie Karol and Patrick Newport wrote in an emailed analysis.

The economists said sales likely will decline further in coming months, because the government shutdown sapped consumer confidence.

While prices have risen sharply this year, the national median price rose at a slower pace over the year in September than previous months, an indication slackening demand could be easing price pressure.

Inventory remained tight in September. If homes continued to sell at their September pace, there was a five-month supply of existing homes for sale, up slightly from 4.9 months in August.

A supply of six months is considered normal.

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