Home Sales Rise, Home Prices Fall

The National Association of Realtors reported that sales of existing homes rose 1.4 percent last month, from a seasonally adjusted annual rate of 4.90 million units to 4.97 million units, however, the median home price fell to $162,500, representing a decline of 2.0 percent for the month and 4.7 percent from a year ago.

Unfortunately, now that the summer selling season has given way to a much slower sales pace during the fall and winter where investors seeking bargains are responsible for a rising share of sales, look for home prices to decline further in the months ahead.

Distressed sales (foreclosures and short sales) accounted for 28 percent of all sales last month, down from a 30 percent share in September, and investors purchased 18 percent of all existing homes in October versus 18 percent in the month prior. Look for both of these metrics to rise in the months ahead.

Total housing inventory fell from 3.40 million units to 3.33 million units and this represents an 8.0-month supply at the current sales pace, down from an 8.3-month supply in September, still almost double the typical 4-5 months of supply.