Economic Watch: Existing Home Sales Hit Highest Level in a Year

After a modest decline last month, existing-home sales in the U.S. bounced back in September to their highest annual pace in a year, according to new figures from the National Association of Realtors.

Total existing-home sales increased 2.4% to a seasonally adjusted annual rate of 5.17 million in September from 5.05 million in August. Sales are now at their highest pace of 2014, but still remain 1.7% below the 5.26 million-unit level from last September.

Lawrence Yun, NAR chief economist, says the improved demand for buying seen since the spring has carried into the fall.

“Low interest rates and price gains holding steady led to September’s healthy increase, even with investor activity remaining on par with last month’s marked decline,” he said. “Traditional buyers are entering a less competitive market with fewer investors searching for available homes, but may also face a slight decline in choices due to the fact that inventory generally falls heading into the winter.”

Regionally, September existing-home sales in the Northeast climbed 1.5% but remain 1.4% below a year ago. In the Midwest, existing-home sales declined 5.6% and remain 4.9% below September 2013’s level. Existing-home sales in the South increased 5% and are now 1.4% above September 2013, while existing-home sales in the West jumped 7.1% but remain 4.0% below a year ago.

The bottom lines is the housing market continues to move in the right direction, finally recapturing 2013 levels after a weak start to the year, said Sterne Agee Chief Economist Lindsey Piegza.

“Still, the biggest concern going forward is the ability of new demand to enter into the market," she said. "While slowing from a double-digit pace, home prices are still rapidly outpacing wage growth, a discrepancy that is already squeezing out many potential homebuyers.

“Particularly among the youngest generations, strapped with debt and minimal savings, first-time homebuyers are becoming an increasingly smaller portion of the market, a trend not going unnoticed by Washington. Already regulators are talking about new programs that will allow more homebuyers to get loans at lower rates and with much smaller down payments.”