September existing home sales fall 1.9%

Existing home sales slipped in September as higher prices hurt affordability, the National Association of Realtors says.

Limited inventory continues to push up prices in much of the country, the association said Monday.
Home sales dropped 1.9% in September to a seasonally adjusted annual rate of 5.29 million from 5.39 million in August. They were still 10.7% above year ago levels.

The decline was expected, says Lawrence Yun, NAR chief economist. With home prices up 12.4% in August from year ago levels, affordability has fallen to a five-year low, especially given mostly flat incomes.

Going forward, higher mortgage interest rates will further cut into affordability, he says. The October numbers are likely to show some home sale delays associated with the government shutdown, Yun says.

While sales fell, the national median existing-home price for all housing types was $199,200 in September, up 11.7% from a year ago. Median prices can vary depending on the type of home sold.
Distressed homes – foreclosures and short sales – accounted for 14% of September sales vs. 24% a year ago. Lower levels in the share of distressed sales account for some of the growth in median price.

The shift away from distressed sales is a sign of recovery, says Trulia economist Jed Kolko.
Total housing inventory at the end of September was unchanged at 2.21 million homes. That represents a 5-month supply vs. 4.9 months in August. In some markets, the inventory of homes for sale is much tighter, which is affecting sales.

The median time on market for all homes was 50 days in September, up from 43 days in August, but much faster than the 70 days on market in September 2012.

The report comes amid other signs of slowing in the housing recovery.

Nationwide, home values were up 1.2% in the third quarter from the second, Zillow data show. That's down from a 2.5% jump in the second quarter from the first.

Higher interest rates, fewer investor buyers and more homes for sale are all contributing to smaller price gains, economists say.

Last week, 30-year fixed rate loans averaged 4.28%, up from 3.37% a year ago, Freddie Mac said.
The government shutdown that ended last week and the related debate over raising the debt ceiling will also likely have an adverse effect on October home sales, says Leslie Appleton-Young, economist for the California Association of Realtors.

The association said last week that California home sales declined in September for the second straight month.

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Article curated from USA Today