Strong sales and tight inventory boost home prices

A combination of rising sales and the lowest inventory in six years helped existing-home prices post annual gains for the eighth month in a row in October, the National Association of Realtors said today.

Sales of existing homes were up 2.1 percent from September to October and 10.9 percent from a year ago, to a seasonally adjusted annual rate of 4.79 million.

At $187,600, the national median price for all housing types including single-family homes, townhomes, condominiums and co-ops was up 11.1 percent from a year ago. The national median price last posted eight consecutive months of annual gains before the crash — from October 2005 to May 2006.

Also released today, a survey by the National Association of Home Builders showed builder confidence rose in November for the seventh month in a row to its highest point since May, 2006.

Rising home prices are boosting home equity, and NAR Chief Economist Lawrence Yun thinks the improvement could be even greater next year.

"Rising home prices have already resulted in a $760 billion growth in home equity during the past year," Yun said in a statement. "Given that each percentage point of price appreciation translates into an additional $190 billion in home equity, we could see close to a $1 trillion gain next year."

NAR estimated there were 2.14 million existing homes listed for sale at the end of October, a 5.4-month supply at the current sales pace. That’s the tightest inventory since February 2006, when the months’ supply of homes stood at 5.2 months.

October’s inventory is down from a 5.6-month supply in September, and represents a 21.9 percent decline from the 7.6-month supply that existed a year ago. Many analysts view a six-month supply of housing as an even balance between buyer and seller demand.

Homes were on the market for a median of 71 days in October, down 26 percent from a year ago when the time to sell an existing home took a median of 96 days.

First-time buyers accounted for 31 percent of purchasers in October, down from last October’s 34 percent.

Distressed homes accounted for 24 percent of all existing-home sales in October — down from 28 percent last October — with an even split between foreclosures and short sales. Foreclosures and short sales sold for 20 percent and 14 percent, respectively, below market value.

All-cash deals accounted for 29 percent of October’s sales — the same as last year and a percentage point higher than September. Investors accounted for 20 percent of existing home sales in October.

Existing-home sales, October 2012

Source: National Association of Realtors

All U.S. regions saw existing-home sales and prices swell in October from a year ago. The Midwest leading the way with an 18.1 percent year-over-year increase to an annual pace of 1.11 million units and a median price of $145,600, up 10.6 percent from last October.

Despite some effects of Hurricane Sandy, the Northeast saw home sales increase 13.7 percent from a year ago to a yearly pace of 580,000 units, with median prices up 4.6 percent, on an annual basis, to $232,600. The annual pace of sales dropped 1.7 percent in the Northeast from September — the only region to see a monthly drop.

NAR anticipates that Hurricane Sandy will continue to influence the region’s housing market in coming months. "We expect an impact on Northeastern home sales in the coming months from a pause and delays in storm-impacted regions," Yun said.

Existing-home sales in the South were up 11 percent to an annual pace of 1.92 million units from October 2011. Median sale prices were up, too, to $152,200, 8.2 percent above last October’s median price.

In the West, sales were up 3.5 percent from a year ago to an annual rate of 1.18 million units, and median prices jumped 21.2 percent from last October to $242,100, the largest yearly proportional price jump of any region.