WASHINGTON – Home resales fell more than expected in October, with large declines in regions which have experienced the biggest price gains, suggesting some softening in the pace of the housing market recovery after strong gains early this year.
Despite last month's drop, housing remains on firmer footing and sales are on track to be the best in eight years.
"This is the same pattern of tight inventory and low first-time buyers that we've seen for several years now. We're up nicely on units and price from a year ago, so the market is in good position to improve steadily from here," said Stephen Phillips, president of Berkshire Hathaway HomeServices in Irvine, California.
The National Association of Realtors said on Monday existing home sales declined 3.4 percent to an annual rate of 5.36 million units. September's sales pace was unrevised at 5.55 million units and was the second highest since 2007.
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The decline in sales was expected after contracts to purchase previously owned homes fell for two straight months.
U.S. Treasury debt prices rose to session highs after the report and the dollar was up against a basket of currencies. The housing index rose 0.61 percent, outperforming the overall stock market.
The weak sales come on the heels of reports last week showing a drop in housing starts in October and a dip in confidence among home builders. Economists had forecast sales falling to a rate of 5.40 million units last month.
Sales were up 3.9 percent from a year ago and sales held above their average for the year.
Housing is being supported by a strengthening labor market, which is boosting household formation by encouraging young adults to leave parental homes. It, however, remains constrained by a persistent shortage of houses for sale, which has driven up prices and sidelined first-time buyers.
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Sales dropped 8.7 percent in the West and fell 3.2 percent in the South. According to the Realtors group, these two regions have experienced large price increases due to tight inventory.
Sales slipped 0.8 percent in the Midwest and were unchanged in the Northeast.
The NAR said there has been a significant decline in sales on the lower end of the market from a year ago.
Last month, the stock of unsold homes on the market fell 2.3 percent from September to 2.14 million units. Supply was down 4.5 percent from a year ago, a worrying sign as housing heads into a quiet season, the NAR said.
At October's sales pace, it would take 4.8 months to clear the stock of houses on the market, up from 4.7 months in September.
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With inventories tight, the median house price increased 5.8 percent from a year ago to $219,600. October's price increase marked the 44th straight month of year-on-year gains.
(Editing by Andrea Ricci)
