Sales of previously owned U.S. homes slowed more than expected in October, and available inventory jumped to the highest level in almost 20 years, signaling that the housing boom has probably ended, the National Association of Realtors said yesterday.
"The housing sector has likely passed its peak . . . and the boom is winding down to an expansion," said David Lereah, the association's chief economist.
Although the group expects "further cooling in the coming months," Lereah said, "we feel confident that housing is landing softly" as mortgage interest rates rise. "We are returning to more balanced markets between home buyers and sellers, one that places buyers on a more even footing."
The 2.7 percent decline in total existing-homes sale -- from a seasonally adjusted annual rate of 7.29 million in September to 7.09 million in October -- would probably have been larger if not for the wave of home-buying after Hurricane Katrina, the trade group said.
Nick Buss, senior vice president for PNC Real Estate Finance, said economists will be watching inventory numbers closely, though he is "more concerned" about supplies of new homes. Those statistics will be released today.
The number of existing homes on the market rose 3.5 percent in October to 2.87 million, or a 4.9-month supply. The number was the highest since 3.04 million in April 1986. As measured in months, the supply was the highest in two years.
The supply of condos and co-ops for sale increased from 5.1 months in September to 5.5 months in October, and it is up 22.2 percent from the 4.5 months reported in October 2004.
Sales were down 4.4 percent for condos and co-ops, compared with the 2.5 percent decline in sales of single-family homes.
Buss said the rise in existing-home inventory has been caused in part by homeowners "trying to test the market out," adding, "It's not surprising that a lot of them would throw their houses on the market when they think it's peaking to see what they can get."
Buss said analysts are "a little more nervous" about the condo and co-op market. In some regions, investors have bet heavily on condos. The fear is that they will dump their holdings or back out of purchases, flooding some areas with inventory.
The Washington area "has seen your fair share of investor activity in condos," said Buss, "but not as much as in South Florida or Phoenix or Vegas."
The Realtors' numbers conform with reports of slowing sales and growing inventory in the Washington area and other previously white-hot markets. But the trade group notes that continued increases in sales and prices would have been unsustainable. Even though sales in October were down from September, they were still up 3.7 percent from the level of 6.84 million units a year earlier, the group said.
The national median existing-home price was also up considerably compared with a year earlier. The median for all housing types was $218,000 in October, up 16.6 percent from $187,000. The median is the point where half of the homes sold for more and half sold for less.
"We are probably better off with a more sustainable market," said Thomas M. Stevens, president of the Realtors association and senior vice president of NRT Inc. in Vienna. In the Washington area, "if the trends of 28 percent annual appreciation" and frenzied sales "had kept going, they'd push more people out of the marketplace."
Mark Zandi of Moody's Economy.com predicted that "with rising inventories [nationally] of unsold homes, house price growth will slow sharply in coming months."
He noted the significance of the "sharp decline in condo sales, which has been the most active part of the market."