Sales of existing homes surge 10.1% in October

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Even as builders pulled back their construction of new homes in October, buyers snapped up previously owned properties at the briskest pace in more than two years, a national organization said this morning.

The National Assn. of Realtors in Washington said sales of previously owned homes increased 10.1% to a seasonally adjusted annual rate of 6.1 million units in October from a downwardly revised pace of 5.54 million in September. That is up 23.5% from the seasonally adjusted annual rate of 4.94 million units in October 2008. The last time the sales pace was that swift was in February 2007.

The buying -- motivated by low interest rates, cheap housing and a credit for first-time buyers -- pushed housing inventory at the end of October down 3.7% to 3.57 million existing homes available for sale, which represented a seven-month supply at the current sales pace, according to the Realtors group.

“The supply of homes on the market is now at the lowest level in over 2 1/2 years -- we’re getting closer to a general balance between buyers and sellers,” Lawrence Yun, chief economist for the group, said in a statement.

The national median existing-home price for all housing types was $173,100 in October, down 7.1% from October 2008. Distressed properties accounted for 30% of sales in October.

In the West, which includes California, sales of previously owned homes increased 1.6% to an annual rate of 1.31 million in October and are 12% above a year ago. The median price in the West was $220,200, which is 14.7% below October 2008. It was the weakest performance for both sales and housing price improvement among the four national regions.

[Update] While a rush of first-time buyers to use the credit ahead of its initial Nov. 30 tax credit helped boost sales in October some economists are predicting a drop-off in sales in the winter months despite the credit’s extension and expansion earlier this month.

In a note to clients this morning Patrick Newport, U.S. economist for IHS Global Insight, predicted that given that the Mortgage Bankers Association’s purchase Index -- a measure of mortgage loan application volume -- dropped to its lowest level in 12 years in its most recent release, a December sales plunge is likely.

“This surge may last one more month,” Newport wrote.

-- Alejandro Lazo