Sales of existing homes fell a bigger-than-expected 2.7 percent in October, a fresh sign that the red-hot housing market is cooling. The decline would have been worse without increased demand from displaced hurricane victims.
Though prices rose at the fastest clip in more than a quarter-century, the number of unsold homes rose to the highest level in 19 years. Analysts forecast that this backlog will dampen future price gains.
The National Association of Realtors reported Monday that sales of existing homes and condominiums fell by 2.7 percent in October, more than double the 1.1 percent decline analysts expected.
Economists said the latest report, which showed sales declines in all regions of the country, appeared to be a signal that the booming housing market was beginning to slow under the impact of steadily rising mortgage rates.
The decline in sales pushed the number of unsold homes to 2.87 million, the highest level in more than 19 years. It would take 4.9 months to deplete that inventory level at the current sales pace.
The median, or midpoint, price of an existing home sold last month rose by 16.6 percent to $218,000, compared with October 2004.
Economists predicted the buildup in unsold homes would help dampen the surge in home prices that saw 69 cities report double-digit gains in prices this summer, compared with the third quarter of 2004.
The sales slowdown was linked to the Federal Reserve's continued campaign to boost interest rates to combat the threat of higher inflation after the recent surge in energy prices.
Most analysts believe housing will cool gradually to more sustainable levels but will escape the adverse consequences that occurred when the Internet stock bubble burst in early 2000, wiping out trillions of dollars in paper wealth and helping to push the economy into a recession. But, many real estate ‘insiders?see thing quite diferently, and are forecasting a much larger drop in real estate values because of the huge popularity of 100% interest only loans used to both in the purchase and re-finance of homes over the past five years.
The weakness in existing home sales in October followed an earlier report that construction of new homes and apartments fell by 5.6 percent last month, the biggest setback in seven months. Applications for new building permits, a good sign of future activity, fell by 6.7 percent, the biggest decline in six years.
The 2.7 percent drop in sales of existing homes would have been a larger 3.2 percent decline without a boost in activity from people relocating after hurricanes Katrina and Rita devastated the Gulf Coast.
Sales surged by 83 percent in Baton Rouge, La.; 32 percent in Mobile, Ala., and 14 percent in Houston. This more than offset sales declines of 42 percent in New Orleans and 44 percent in Beaumont, Texas.
The 16.6 percent increase in the median sales price was the biggest year-over-year price increase since a 17.2 percent jump in July 1979. The backlog of 2.87 million unsold homes was the highest since April 1986.
By region of the country, October's biggest sales decline occurred in the Northeast, a drop of 7.4 percent. Sales were down 1.9 percent in the Midwest and 1.2 percent in the West. Sales were down 1.8 percent in the South despite the big gains in areas where displaced homeowners relocated
Copyright 2005 Promotions Unlimited - All rights reserved
Bob Schwartz, CRS, GRI, is a Certified Residential Specialist San Diego real estate broker http://www.Brokerforyou.com with over 27 years experience. Bob's other sites are about San Diego downtown real estate condominiums at: http://www.downtown-san-diego-real-estate.com & a free San Diego For Sale By Owner website at http://www.san-diego-for-sale-by-owner.com These real estate website provide visitors the ability to search the entire San Diego MLS database for property that fits their exact requirements. Also, there are many useful, money-saving real estate articles for both buyers and sellers. Also, a number of the sites show recent closed sales prices for various areas of San Diego California.