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U.S. home sales rise in October
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The Associated Press-
Existing home sales rose 1.4 per cent in the U.S. in October, the National Association of Realtors said Monday.
That amounted to a seasonally adjusted annual rate of 4.97 million, better than the consensus among analysts for a drop of 2.2 per cent to 4.8 million, but still at depressed levels and below the six million that economists say is consistent with a healthy U.S. housing market.
Last year's sales figures which were the worst in 13 years. As of October 2011, sales are nearly 14 per cent above those levels, a sign that the market is gradually making progress, according to TD economist Chris Jones.
Jones said in a commentary that it was also encouraging that there is now about eight months worth of inventory on the market, down from 9.5 months in July, and the lowest level in ten months.
But headwinds remain, Jones said.
“First, there is a limit to how much the market can recover as long as the unemployment rate stays elevated and income growth remains subdued. Second, banks have not loosened credit standards to the extent that they tightened them during the recession, making it difficult for even the most credit-worthy of borrowers to access mortgage credit."
"Unfortunately, tightened lending conditions are likely to persist as long as banks’ balance sheets remained strained by non-performing loans made at the height of the credit boom.
Cancellations rise
And more deals are being cancelled at the last minute, a sign that even those who are looking to buy are worried about the housing market.
One third of realtors say they've had at least one contract scuttled in October, up from 18 per cent in September.
More than two years after the recession officially ended, many people can't qualify for loans or meet higher down-payment requirements.
Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling. Home sales are also being hurt by a steep decline in first-time buyers.
Sales have fallen in four of the five years since the housing boom went bust in 2006. Declining prices and record-low mortgage rates haven't been enough to boost sales.
Most economists say home prices will keep falling, by at least five per cent, through the rest of the year. Many forecasts don't anticipate a rebound in prices until at least 2013.
The high rate of foreclosures has made re-sold homes much cheaper than new homes. The median price of a new home is roughly 30 per cent higher than the price of one that's been occupied before — twice the normal mark-up.
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