October Home Sales Jump but Prices Continue Down

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The pace of existing home sales ROSE 2.0 percent or 110,000 in October to a seasonally adjusted annual sales rate of 5.48 million;
  • The September sales rate was REVISED DOWN 20,000 to 5.37 million;
  • Median price of an existing single-family home FELL 0.2 percent or $600 to $247,000; the fourth consecutive month-month decline though the median price is still up 5.5 percent or $12,900 from October 2016;
  • Year-year the median price has now been UP for 68 straight months – since February 2012.
  • Number of homes available for sale FELL for the fifth straight month, down 3.2 percent or 60,000 to 1.8 million; a year ago there were 2.01 million homes for sale;
  • The months’ supply of homes for sale in October FELL to 3.9 from 4.2 in September and 4.4 months a year ago;

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The housing market picked up steam in October, fueled in part by the fourth straight month of price declines, according to the latest data from the National Association of Realtors (NAR) Tuesday.

No surprise really that sales (closings) went up as prices dropped since so many home buyers make decisions based on the monthly payment. In October, according to Freddie Mac, the average rate for a 30-year, conventional, fixed-rate mortgage rose to 3.90 percent from 3.81 percent in September. The average commitment rate for all of 2016 was 3.65 percent, suggesting buyers with mortgage commitments may have rushed to close before rates went higher. The 110,000 increase in closing (SAAR) was the steepest since March.

That closings may have been accelerated is also supported by back-up data, specifically the NAR’s pending home sales index (PHSI) which tracks contracts for sale, The PHSI for August fell which would have meant a drop in closings two months later (October). The PHSI for September was flat to August so the October closings may reflect a “borrowing” from future closings rather than the beginning of a spurt in home sales.

The fundamentals arguing against an increase in home sales remain unchanged and indeed may have been exacerbated by the tax proposals wending their way through Congress, particularly the proposal to eliminate the deductibility of student loan interest. Millennials already saddled with student loan debt – affecting tests of creditworthiness – will struggle even more to make down payments and cover monthly mortgage obligations.

Hear Mark Lieberman every Friday, on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124, at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

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