Economy

Low Inventory Driving Existing Home Prices Higher

November 20, 2013

Existing home sales fell in October but low inventory continues to drive home prices upward said the National Association of Realtors in their November report. Existing housing inventory stood at 2.13 million homes at the end of October—a drop of 1.8 percent from last month.

Home sales fell 3.2 percent to a seasonally adjusted annual rate of 5.12 million in October from 5.29 million in September. Sales are up 6.0 percent from this time last year.

Single-family home sales dropped 4.1 percent while existing condominium and co-op sales rose 3.3 percent as compared to September.

The national median existing home price was up 12.8 percent year-over-year to $199,500. The median time on market rose to 54 days as compared to 50 days in September and 71 days in October 2012.

Fourteen percent of sales were from foreclosures and short sales, unchanged from September but well below the 25 percent level reported in October 2012.

Sales dropped in all the US regions while prices increased year-over year—ranging between a rise of 7.4 percent in the Northeast to 17.2 percent in the West.

Lawrence Yun, NAR chief economist, said a flattening trend is expected. “The erosion in buying power is dampening home sales,” he said. “Moreover, low inventory is holding back sales while at the same time pushing up home prices in most of the country. More new home construction is needed to help relieve the inventory pressure and moderate price gains.”

The National Association of Realtors bases existing home sales on transaction closings, differing from U.S. Census Bureau new home sales which are based on contracts or acceptance of a deposit.