Beating analysts’ predictions, sales of existing U.S. homes rose in October as did home prices, according to the National Association of Realtors, both signs of a clearly recovering housing market.
Total sales increased 2.1 percent in October to a seasonally adjusted annual rate of 4.79 million, up from 4.69 million in September. Sales were also up 10.9 percent from the year before.
Meanwhile, the median price for existing homes rose to $178,600 last month, an 11.1 percent increase from October 2011, making the eight straight month of yearly price growth. It is down, however, from $183,900 in September.
That bodes well for American homeowners, says NAR chief economist Lawrence Yun in a statement.
“Rising home prices have already resulted in a $760 billion growth in home equity during the past year,” Yun said. “Given that each percentage point of price appreciation translates into an additional $190 billion in home equity, we could see close to a $1 trillion gain next year.”
Inventory fell in October by 1.4 percent to 2.14 million homes on the market. At the current sales pace, that represents a 5.4-month supply, down from a 5.6-month supply in September. Inventory is now at its lowest point since February 2006, and is down 21.9 percent from last year. This decrease in available homes, especially distressed properties, is helping to push prices higher as buyers compete.
Distressed homes, including foreclosures and short sales, made up 24 percent of sales, down from 28 percent one year earlier.
Affordability continues to be historically high as interest rates remain at all-time record lows. Freddie Mac reported that the average rate on a 30-year fixed rate mortgage fell to 3.38 percent in October.
And although it did major damage, Hurricane Sandy proved to have only limited effect on October sales, the NAR said.
“Home sales continue to trend up and most October transactions were completed by the time the storm hit, but the growing demand with limited inventory is pressuring home prices in much of the country,” he said. “We expect an impact on Northeastern home sales in the coming months from a pause and delays in storm-impacted regions.”