Home Sales Remained Sluggish in October
November 21 2017 - 1:21PM
Dow Jones News
By Laura Kusisto
Existing-home sales increased 2% in October from a month earlier
to a seasonally adjusted annual rate of 5.48 million, the National
Association of Realtors said Tuesday. But sales dipped 0.9% from
the same month a year earlier, the second consecutive decline on an
annual basis.
"The housing market largely remains stuck in the same,
predictable rut it has been in for the past two years or so" of
high demand and low inventory, said Svenja Gudell, chief economist
at home-listing website Zillow.
Home sales in areas hit by hurricanes, including Houston,
Orlando and other major markets, showed gains from previous months,
helping to drive the monthly increase in October, according to
Lawrence Yun, NAR's chief economist.
Sales in the south rose 1.9% from September but remained 1.8%
lower than a year ago. Economists said pent-up activity from
closings that were delayed from Hurricane Harvey in August and
Hurricane Irma in September helped boost sales activity.
The storm-battered south is "the weakest link when it comes to
existing home sales in the nation," said Chris Rupkey, chief
financial economist at financial firm MUFG. "It's going to take
some more time to recover."
Sluggish sales activity is being driven more by a lack of homes
for sale than by waning demand.
Housing inventory decreased 3.2% in October and is 10.4% lower
than a year ago, having fallen year-over-year for 29 consecutive
months, according to NAR.
It would take just 3.9 months to exhaust the supply of homes on
the market, the lowest October reading since 1999, the year NAR
started tracking the data.
The supply shortage, in turn, is driving prices higher. The
median price of homes sold last month rose to $247,000, up 5.5%
from a year earlier.
Home sales are currently "significantly below the potential of
the market," according to Mark Fleming, chief economist at title
insurer First American, who estimates sales should be more than 7%
higher today based on easing credit standards, low interest rates,
high employment and income growth. The reluctance of owners to put
their homes on the market given the lack of inventory is one reason
for low sales. "It's hard to want to bring your home to market as a
seller if you fear being able to find something to buy," Mr.
Fleming said.
Economists said a tax overhaul could inject additional
volatility into the market in the coming months. Proposed changes
to cap the mortgage interest deduction at $500,000 from the current
$1 million and reduce or eliminate state and local tax deductions
could deal a particularly big blow to pricier coastal markets that
have been showing some of the strongest sales activity lately.
As bills move forward in the House and Senate, it could create a
rush of homeowners looking to take advantage of provisions that may
be grandfathered in, even as others to pull back for fear of being
hurt by the changes down the road.
"It's pretty radical what's being proposed here," Mr. Rupkey
said. "There's going to be some fallout if it goes through."
Sharon Nunn contributed to this article.
Write to Laura Kusisto at laura.kusisto@wsj.com
(END) Dow Jones Newswires
November 21, 2017 13:06 ET (18:06 GMT)
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