In further evidence of a slowing economy, sales of existing homes fell in October for the second consecutive month even though mortgage rates declined, a real estate trade group reported Friday.
The National Assn. of Realtors said existing single-family home sales dipped to a seasonally adjusted annual rate of 3.63 million units last month, down 1.1% from the September sales rate.
It marked the third month out of the last four in which sales declined. They dropped an identical 1.1% in September and a striking 4.5% in July.
The downturn in October occurred even though mortgage rates were falling, edging below 10% in some parts of the country for fixed-rate loans.
Analysts said the October decline in existing home sales, coupled with a sharp 7.8% September drop in new home sales, reflected waning economic activity in the second half of the year.
While they did not predict a severe slump in the housing industry, economists said the downward trend is likely to continue, especially in view of forecasts that mortgage rates will turn higher.
The rate on 30-year, fixed-rate mortgages rose to 10.39% this week, the highest level since early October, the Federal Home Loan Mortgage Corp. reported Friday.
Many economists believe fixed-rate mortgages will top 11% by early next year.
David Wyss, chief financial economist with Data Resources Inc., said that while rising mortgages would continue to dampen demand, the market for single-family homes should hold steady through the next year.
However, he predicted that construction of multifamily units, already down by more than 50% from the peak three years ago, would weaken further.
In a second report Friday, the realtors group said that sales of apartment condominiums plunged 12.9% during the April-June quarter to an annual rate of 339,000 units, compared to the first three months of the year. The drop was blamed on weakness in condominium sales in the Northeast, which accounts for 20% of the overall U.S. market.
John Tuccillo, chief economist of the Realtors group, said that because of strong sales in the first half of the year, resales of single-family homes should equal the 3.53 million homes sold in all of 1987.
“The summer rush is over and despite the window of opportunity afforded by low mortgage rates in October, the surge of home sales we saw earlier has run its course,” he said.
The decline in sales was accompanied by a small drop in prices. The median cost of an existing home sold in October was $88,100, down $100 from the September level. However, the price was still 4.1% higher than a year ago, when the median home price was $84,600.
Tuccillo said the price declines that have been seen over past two months reflected in part the slowdown in sales in the Northeast, the region with highest home prices.
In October, the median sales price in the Northeast was $137,600, down 2.7% from the September level. The median home price in the West was $124,400, down 3% from the month before.
The median sales price in the Midwest, the lowest-priced region in the country, was $67,600, a 0.9% increase over the previous month.
The drop in October sales reflected a 2.9% decline in the West, which fell to an annual rate of 700,000 units.