U.S. existing home sales fall, price appreciation slows

Mon Oct 21, 2013 2:31pm EDT
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. home resales fell in September and prices cooled as higher mortgage rates took the edge off the housing market recovery.

The National Association of Realtors said on Monday that sales of previously owned homes fell 1.9 percent last month to an annual rate of 5.29 million units.

At the same time, the median price rose 11.7 percent in September from a year ago to $199,200. While that was the 10th straight month of double-digit gains, it was the smallest increase since April.

"This softening had been expected in response to the increase in mortgage rates that began in May," said Daniel Silver, an economist at JPMorgan in New York.

The NAR said a combination of high home prices, barely rising salaries and higher mortgage rates was hurting affordability, which hit a five-year low in September according to its gauge. The trade group said sales probably peaked in July and August.

August sales were revised to a 5.39 million rate, unchanged from July, well below the 5.48 million rate previously estimated.

Last month's sales drop adds to other indicators, such as pending contracts to buy previously owned homes and home builders' confidence, that have suggested a run-up in mortgage rates is starting to slow the housing market recovery.

Interest rates have risen sharply since May on expectations the Federal Reserve would start cutting back on its monthly bond purchases this year, with the 30-year fixed mortgage rate surging nearly a full percentage point.   Continued...

An existing single family home which is up for sale is pictured in Burbank, California December 15, 2011. REUTERS/Fred Prouser