Tight inventories, rising prices hurt U.S. home sales
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. home resales fell in October as a persistent shortage of properties limited choice for potential buyers and pushed up prices, suggesting some softening in the pace of the housing market recovery after strong gains early this year.
Still, housing remains on solid footing, with sales for the full year on track to be the best in eight years. That should see housing take up some of the slack from a chronically weak manufacturing sector.
"The housing market is in decent shape but could be a lot better if people decided they were ready to move and listed their homes," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
The National Association of Realtors said on Mondayexisting home sales declined 3.4 percent to an annual rate of5.36 million units. September's sales pace was unrevised at 5.55 million units and was the second highest since 2007.
The drop in sales was expected after contracts to purchase previously owned homes fell for two straight months. But with a tightening labor market, marked by a 5.0 percent unemployment rate, housing fundamentals are fairly healthy.
In addition, the government has taken steps to ease lending standards for young adults. However, an anticipated interest rate hike next month by the Federal Reserve could make housing a bit expensive, especially if there is no significant pick-up in wage growth.
"There is every reason to expect that the demand for homes will grind higher in the coming months. While interest rates are set to rise, so are incomes, and that will keep housing affordability historically favorable," said Matthew Pointon, property economist at Capital Economics in New York.
The weak sales come on the heels of reports last week showing a drop in housing starts in October and a dip in confidence among home builders. Economists had forecast sales falling to a rate of 5.40 million units last month. Continued...