Existing-Home Sales Slip with Affordability

After reportedly reaching their highest level in nearly four years in August, existing-home sales dropped in September thanks to limited inventory and rising home prices, according to the ""National Association of Realtors"":http://www.realtor.org/ (NAR).

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Total existing-home sales--measured as completed transactions of single-family homes, townhomes, condos, and co-ops--fell 1.9 percent in September to a seasonally adjusted annual rate of 5.29 million. August's sales were revised downward to 5.39 million.

Year-over-year, September transactions were up 10.7 percent, marking the 27th straight month of annual improvement.

Meanwhile, the national median existing-home price for all housing types was $199,200, up 11.7 percent--the 10th consecutive month of double-digit year-over-year gains.

The association says September's drop in sales wasn't surprising, especially given the ongoing upward trend in prices.

""Affordability has fallen to a five-year low as home price increases easily outpaced income growth,"" said NAR chief economist Lawrence Yun. ""Expected rising mortgage interest rates will further lower affordability in upcoming months. Next month we may see some delays associated with the government shutdown.""

According to NAR, data from its listing site, Realtor.com, shows the strongest yearly increases in listing price were in the Detroit area (+44.6 percent), Las Vegas (+30.7 percent), and Sacramento (+28.9 percent).

Total housing inventory was flat at 2.21 million available existing homes for sale, representing a 5.0 month supply compared to 4.9 months in August. Unsold inventory was [COLUMN_BREAK]

1.8 percent above September 2012, when there was a 5.4 month supply. (Months' supply is calculated based on the current sales pace.)

Distressed homes--foreclosures and short sales--made up 14 percent of September sales, up from 12 percent in August (which was the lowest share since monthly tracking began in October 2008). Nine percent of September sales were foreclosures (with an average discount of 16 percent below market value), while 5 percent were short sales (with an average discount of 12 percent).

The amount of first-time buyers was unchanged from August, with that group accounting for 28 percent of existing-home purchases. Last year, that share was 32 percent. Investors--who usually pay in cash--purchased 19 percent of homes in September, up from 17 percent in August and 18 percent in September 2012.

At the regional level, existing-home sales fell in all regions except the West, where they increased 1.6 percent month-over-month and 7.8 percent year-over-year to a pace of 1.25 million.

In the Northeast, sales declined 2.8 percent to an annual rate of 690,000, coming up 15.0 percent ahead of September 2012. Existing-home sales in the Midwest fell 5.3 percent from August to a pace of 1.25 million, up 12.6 percent year-over-year. Finally, in the South, sales dipped 1.4 percent to an annual level of 2.10 million, 9.9 percent above September 2012.

Median prices increased in all four regions.

Looking ahead to October's report, NAR expects to see another slowdown in sales as a result of the government shutdown that lasted through the first half of the month.

""Just one impact of the recent government shutdown--delays in tax transcripts needed for approval of mortgage loans--put a monkey wrench in the transaction process and could negatively impact sales closings in next month's report,"" said NAR president Gary Thomas.

Thomas also said complications arising from flood insurance concerns may be reflected in the next report as some regions--particularly Colorado--struggle to rebuild.

""Realtors report that approximately 10 percent of transactions in September were located in flood zones, and that nearly one out of 10 of those transactions were delayed or canceled due to concerns over rising insurance rates,"" he said.