–Inventories Improved Slightly to 10.5 Months Supply or 3.86M For Sale
–NAR Econ Says Mortgage Standards ‘Overly Restrictive’

By Denny Gulino and Ian McKendry

WASHINGTON (MNI) – U.S. sales of existing single-family homes, town
homes, condominiums and cooperatives slipped 2.2% in October to a 4.43
million annual rate, still not back to a sustainable recovery pace, the
National Association of Realtors reported Tuesday morning.

The slightly below-expectations October result continued to reflect
“overly stringent” mortgage standards, NAR economist Lawrence Yun told
reporters. The proof, he said, is that 2009 and 2010 default rates are
too good, showing credit restrictions are overshooting to exclude some
qualified buyers.

Yun also said the “slight decline after two straight months of
increases” may also have been due to the moratoriums put in place on
foreclosures by some large banks, keeping some foreclosed houses off the
market. Now that foreclosures “have been restarted” that effect might
fade.

September’s sales level of 4.53 million was unrevised and Yun
repeated this year’s sales total appears to be heading to 4.8 million,
still below the approximately 5 million sales a year he said would be
considered approaching normal. Next year’s sales are seen by the NAR to
be hitting that pace, at 5.1 million, particularly if mortgage credit
becomes more available and hiring picks up.

The number of homes available for sale in October was at 3.86
million or 10.5 months at the current sales pace, slightly improved from
September’s 10.7 months.

The national median sales price in October was $170,500, down 0.9%
from a year earlier.

Sales declined in all four major geographical regions, with the
South the worst with a 3.4% drop. The West saw sales down 1.9%, the
Northeast, 1.3% and the Midwest 1.1%.

A continuing survey of Realtors suggested prices a year from now
will be about the same as they are now, and Yun said the survey
expectations have proven correct in the past.

All-cash buyers were about 29% of the October total, still an
exceptionally high proportion, and buyers of distressed properties —
either foreclosed or short sales — were about 34%. Yun said that the
foreclosure moratorium some banks had in place could have trimmed
October sales to some small degree.

He also said that the foreclosure documentation problems that have
led to court challenges have proven to be just “noise in the system” and
not a big factor for sales of foreclosed properties. Most foreclosures,
he said, are because mortgage payments are a year or more in arrears and
paperwork problems are only delaying the inevitable, not preventing
ultimate foreclosures.

“The upper end is holding up a little better than the lower
end,” Yun said of the price spectrum. The foreclosure moratoriums may
have been “scaring away” some buyers of distressed properties, he said,
but now foreclosures “are being restarted.”

Supporting his contention that mortgage credit standards are too
stringent, Yun said, “The FHFA figures show 2009 and 2010 vintage loan
originations are performing much better than before the bubble, implying
from my perspective, overly stringent credit conditions.” In fact, said,
the recent vintages are performing even better than pre-bubble,
pre-crisis default rates early in the decade.

“You certainly want default rates lower,” he continued, “but the
dial has been tightened way too much.” Mortgages now are performing
“super well,” and “it’s easy to dial back credit standards” to obtain
those default rates. The result now is that some percentage — he
refused to estimate how many — of qualified buyers are unable to get
mortgages and the key determinant of sales appears to be “who has
access to credit.”

First-time buyers accounted for 32% of October’s sales, “much
lower than the 40% to 50%” when the first-time homebuyer tax credit
was available.

If 2011 sales reach 5.1 million that will be back to the level of
a “normal year,” the year 2000, when the number of employed
Americans was the same as it is now. Now, however, the number of
unemployed is much higher.

Single-family home sales dropped 2.0% and condo sales were off 3.6%
in October. The number of single-family homes available for sale
amounted to 10.1 months’ supply at October’s sales rate. For condos,
there was a 13.4 month supply on the market.

** Market News International Washington Bureau: 202-371-2121 **

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