Real-estate market cools in October
Sales decline more than expected as a backlog of unsold homes multiplies.
From Wire and Staff Reports November 29, 2005, Orlando Sentinel
WASHINGTON -- Sales of existing homes fell a bigger-than-expected 2.7 percent in October, a fresh sign that the red-hot housing market is cooling. The decline would have been worse without increased demand from displaced hurricane victims.
Though prices rose at the fastest clip in more than a quarter-century, the number of unsold homes rose to the highest level in 19 years. Analysts forecast that this backlog will dampen future price gains.
The findings build on a report last week on Florida's housing market. Signs of cooling are showing up throughout the state, though sales are still good and median prices continued to rise in October.
Statewide, October sales fell 5 percent from October 2004, though Florida Association of Realtor officials attributed most of the decline to disruptions from Hurricane Wilma. The statewide median price in October was $241,000, up 28 percent from $188,800 a year ago.
And in Metro Orlando, a ballooning inventory that hit the highest level in eight years was a clear indication of a cooling market.
Sales in the Orlando market slipped in October from September, the second consecutive monthly decrease, though sales were up from October 2004 and activity for the year is ahead of last year's record pace. Orlando's existing-home median price in October rose to a record $246,790, after falling in September for the first time in a year.
In its report Monday, the National Association of Realtors said that sales of existing homes and condominiums fell by 2.7 percent in October. Analysts expected a 1.1 percent decline. It left sales at a seasonally adjusted annual rate of 7.09 million, down from a sales rate of 7.29 million units in September, which was the second-fastest pace on record.
The decline in sales pushed the number of unsold homes to 2.87 million, the highest level in more than 19 years. It would take 4.9 months to deplete that inventory level at the current sales pace. The median, or midpoint, price of an existing home sold last month rose by 16.6 percent to $218,000, compared with October 2004.
Economists said Monday's report appeared to be a signal that the booming housing market was beginning to slow under the impact of rising mortgage rates.
"The housing sector has likely passed its peak. The boom is winding down," said David Lereah, chief economist for the Realtors. "I expect continued softening in housing if rates remain at these levels or go higher."
Economists predicted the buildup in unsold homes would help dampen the surge in home prices that saw 69 cities report double-digit gains in prices this summer.
