Existing Home Sales Climb Again in October

Sales of existing homes in the US rose for the second consecutive month in October and are at their highest level since July 2007, according to a Reuters report. It appears as buyers are coming out of the woodwork to avail themselves of high levels of affordability and the tax credits available for first time and existing homeowners.

The report reflected a survey compiled consisting of predictions of 29 analysts. The analysts projected, based on October sales, a seasonally adjusted annual rate of 5.7 million home sales. It was the highest rate of home sales since July of 2007, when the rate was slightly higher, and up from September’s rate which was 5.56 million.

The forecasts did have a broad range, from as low as 5.25 million home sales to as much as 6 million. Existing homes have been selling faster and faster for the majority of this year and if the October projections hold true, it will be the sixth time in seven months that sales increased on a monthly basis. Home sales usually rise in the Spring with warmer weather but this year the momentum has continued through the summer and fall.

First time homebuyers have been enticed into the market in huge numbers by the federal government’s $8,000 tax credit, part of a broader economic stimulus bill, which had been scheduled to expire on November 30th. President Obama’s administration, however, recently extended the credit through April 30th and added a $6,500 tax credit for existing homeowners buying a new home. The new credit applies for buyers who sign contracts to buy a home before April 30th and close before June 30th.

Another contributing factor to rising sales are the lowest mortgage rates in decades. The resulting improved affordability of home ownership has helped the housing market begin to stabilize after a three year crisis, the worst in the US since the Great Depression. Home prices have leveled off throughout the US and in some areas have begun to rise again.

The stabilization of the housing market is of course a good indicator for the economy as a whole, since the housing market was the first area hit at the onset of the recession. But since foreclosed properties account for a large portion of overall sales, many doubt the sustainability of the apparent recovery. There are certainly a tremendous amount of unsold homes remaining, with possibly millions more foreclosures on the horizon, so prices could still dip in the near future.

The overall state of the economy is a significant obstacle for the housing market, as rising unemployment and fear of future layoffs is keeping many potential homebuyers from entering the market. According to the US Labor Department, unemployment reached 10.2% in October, the highest jobless rate in the US in over 26 years. Other buyers have been deterred by difficulty in obtaining financing.

While the analysts project a rise in home sales in October, the same is not true for the next few months. All recent reports indicate that the housing market is still very much in a recession. According to the Commerce Department, new housing starts in the US took an unexpected steep fall in October. The 10.5 percent drop brought the number of new housing starts to its lowest level in six months.