Fewer Americans bought homes in October, a sign that rising home values may be pushing more would-be buyers to the real estate market’s sidelines.
The National Assn. of Realtors said Monday that sales of existing homes fell 3.4% last month to a seasonally adjusted annual rate of 5.36 million.
But last month suggested the start of a reflexive backlash after the strong gains in home-buying. The additional sales have spawned sharp price increases that have outpaced wage growth and left some would-be buyers out of the market.
The October sales decrease indicates “the market is treading water,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Yet other economists anticipate sales growth to return because of the underlying health of the broader economy.
The median home sales price was $219,600 in October, a 5.8% annual increase. Sales fell sharply in the West and South where prices have risen at the fastest rates this year. Purchases declined 8.7% in the West and 3.2% in the South, while dipping 0.8% in the Midwest and staying unchanged in the Northeast on a seasonally adjusted basis.
The 5% unemployment rate has helped coax traditional buyers into the market, supplanting the investors who bought foreclosed properties for all-cash in the aftermath of the Great Recession. Current homeowners seeking an upgrade or chance to downsize appear to have accounted for much of this year’s sales gains, as first-time buyers accounted for 31% of sales in October. First-time buyers have historically made up 40% of all sales.
Tight inventories are curbing enthusiasm among some homebuyers. Just 4.8 months’ supply of homes is available, well below the 6 months associated with a balanced market.
Low mortgage rates have offset some of the pain from those price gains. But rates have started to rise ahead of a December Federal Reserve meeting, where Fed officials are expected to raise short-term rates for the first time in nearly a decade.
The average, 30-year fixed mortgage rate has risen to just a hair under 4% from 3.79% a month ago, according to mortgage buyer Freddie Mac.
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