The National Association of Realtors (NAR) released their latest statistics for existing home sales last week, and the numbers show both some positives and negatives regarding America's housing industry. Home sales are up and so are selling prices, but foreclosures and short sales still make up a large portion of the sales numbers.
So, what's the good news? Even with the highly-populated Mid-Atlantic and Upper East Coast regions still being affected by Hurricane Sandy, national sales numbers were up in October. The report from the NAR shows a 10.9% increase in existing home sales when comparing numbers from October 2012 to the same month in 2011. The national median existing-home price (S178,600, to be exact) is also up 11% when compared to the same month last year. That's the eighth consecutive monthly year-to-year increase. We hadn't seen an increase for so many months in a row since the period from October 2005 to May 2006.
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The NAR's chief economist Lawrence Yun says rising home prices have already resulted in $760 billion worth of growth in home equity during the past year. He estimates that could increase to close to a $1 trillion gain in 2013. Total housing inventory -- meaning the number of homes currently available on the market -- dropped to 2.14 million across the country. At the current sales rate, that's a 5.4-month supply. That's also down from October 2011, when there was a 7.6-month supply of inventory. The median time a home was on the market before selling was 71 days in October, down from 96 days during the same month last year. And finally, according to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to record low 3.38% in October. Compare that to October 2011, when the rate was 4.07%.
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So, what's the bad news? Distressed homes still accounted for a large chunk of all home sales in October. In fact, 24% of all of the homes sold in October were either foreclosures or short sales. That's a decrease from the same month last year (when foreclosures and short sales made up 28% of the homes sold around the country), but economists at the NAR say all of those distressed properties are bringing down the national median sales price -- and that's not good. According to the NAR, foreclosures sold for an average discount of 20% below market value of the homes, while short sales were discounted 14%. While interest rates continue to hover near all-time record lows, they are expected to rise in the months to come. That's due to the looming "fiscal cliff", increased retail sales during the holidays, and higher-than-expected numbers of new home construction across the country. More homes being built creates jobs, and whenever Wall Street sees an increase in jobs, they quickly up the bidding on stocks and sell off bonds. When that happens, mortgage rates elevate quickly.
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While Hurricane Sandy didn't affect October numbers too much, Yun expects the storm to have an impact on sales in the future. Most October transactions were complete before the storm hit, so it's too soon to determine how much the storm will effect home sales in the Northeast. Yun says the pause and delays in the storm-impacted regions will certainly hurt sales numbers in that area of the country, but it could also affect national sales figures as well. So, count on Sandy to continue to be a story for awhile!
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