Existing-Home Sales Suffer Largest Annual Drop in Four Years -- Update
November 21 2018 - 03:51PM
Dow Jones News
By Laura Kusisto and Sarah Chaney
WASHINGTON -- Sales of previously owned U.S. homes posted their
largest annual decline since 2014 in October, as the housing market
continues to sputter due to higher mortgage rates that are reducing
home affordability.
The latest data offered a mixed picture of a market that isn't
in free fall but also is far from robust. Existing-home sales edged
up 1.4% in October from the previous month to a seasonally adjusted
annual rate of 5.22 million, the National Association of Realtors
said Wednesday. That broke a six-month streak when sales declined
compared with a month earlier.
Sales, however, posted a sharp 5.1% drop compared with a year
earlier, indicating the market is likely to end the year on a
sluggish note.
Lawrence Yun, the trade group's chief economist, said the annual
decline signals softness in the housing sector that is likely to
persist in the months to come.
"There is some feeling that the market could actually go even
lower than what it is now in terms of sales," Mr. Yun said.
When sales began slowing this spring, economists initially
blamed a shortage of inventory, which has plagued the housing
market throughout the recovery. But rising mortgage rates are
playing a bigger role in slowing buyer demand than many economists
had expected, shaking confidence that now is a good time to buy a
home, according to recent surveys.
Mr. Yun said higher interest rates appear to be choking off
buyer demand, and said the Federal Reserve should consider pausing
its rate increases to give the housing sector time "to be on firmer
ground."
Mike Fratantoni, chief economist at the Mortgage Bankers
Association, said recent declines in the stock market are also
causing fresh unease. "The level of volatility in the stock market
is reflecting a lot of uncertainty about where we are with the
broader economy. There is a little bit of increased anxiety about
how much things are going to slow, " he said.
The good news for buyers is that conditions are becoming
friendlier to them, as mortgage rate and home-price increases slow
and inventory of homes for sale is growing compared with last
year.
The rate for a 30-year fixed rate mortgage averaged 4.81% this
week, down from 4.94% a week earlier, according to data released by
Freddie Mac on Wednesday. Rates are still up significantly from a
year ago, when they averaged 3.92%.
The median sale price for an existing home in October was
$255,400, up 3.8% from a year earlier. That shows a cooling from a
year ago, when prices rose about 5.5%.
There was a 4.3-months' supply of homes on the market at the end
of October, based on the current sales pace, down from 4.4 months
in September but up from 3.9 months a year ago.
Mr. Fratantoni said the combination of more muted price growth
and a greater number of homes for sale could boost the housing
market in the spring, especially if wages continue to rise.
"We're in this awkward place right now," he said.
Purchases of previously owned homes account for the bulk of U.S.
homebuying activity. The Commerce Department releases data on
October new-home sales next Wednesday.
Home construction is weakening some, too. Starts fell in October
for single-family construction, and permits, which can signal how
much construction is planned, dropped 0.6% from September to an
annual pace of 1.263 million last month.
Builders are taking a cautious stance given the Federal
Reserve's plan to continue gradually raising interest rates, the
National Association of Home Builders said Monday. The trade
group's gauge of U.S. home-builder confidence fell sharply in
November, dragged down by heightened concerns about affordability
in the housing market.
News Corp, owner of The Wall Street Journal, also operates
Realtor.com under license from the National Association of
Realtors.
Write to Laura Kusisto at laura.kusisto@wsj.com and Sarah Chaney
at sarah.chaney@wsj.com
(END) Dow Jones Newswires
November 21, 2018 15:36 ET (20:36 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.