Existing Home Sales Fall, Prices Rise 11.3% Year-Over-Year

The National Association of Realtors reported that sales of existing homes in the U.S. fell 1.7 percent last month, from an upwardly revised annual rate of 4.83 million units in August to a rate of 4.75 million units in September, as low mortgage rates and limited inventory continue to push prices higher.

As shown below, the September sales rate was the second best performance since the various government sponsored efforts to resuscitate the housing market came to an end more than two years ago and, when combined with the decline in inventory, down 3.3 percent to 2.32 million units, caused the months of supply metric to fall to a six-year low, down from 6.0 months to 5.9 months, close to the long-run average.

Though the median sales price fell 1.8 percent last month, from $187,400 in August to $183,900 in September, on a year-over-year basis prices notched their first double-digit gain since the housing bubble was in its heyday, rising 11.3 percent from last year at this time.

First-time buyers accounted for 32 percent of all sales, investors were responsible for 18 percent of the total, and all-cash sales were at 28 percent. Distressed homes - foreclosures and short sales - accounted for 24 percent of all sales and were about equally split between the two as foreclosures sold at an average discount of 21 percent and short sales were discounted 13 percent.

To be sure, record low interest rates and banks moving slowly on the millions of home now in the “foreclosure pipeline” are playing important roles in the recent turnaround in the nation’s housing market that now seems to be morphing into a mini-housing bubble as evidenced by the double-digit annual price gains.