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REALTOR®: October Sees Another Big Gain in Existing-home Sales as Inventories Continue to Shrink

Wednesday, November 25, 2009

The latest report from the National Association of REALTORS® showed yet another hefty gain for existing-home sales in the month of October, the continuation of a strong uptrend established over the past seven months. Inventories continue to decline, however, and this could signal more competition among buyers, which has already led to price increases in many areas of the country, according to REALTOR® officials.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – surged 10.1 percent to a seasonally adjusted rate of 6.10 million units in October from a downwardly revised pace of 5.54 million in September. Sales were up 23.5 percent from the same period last year and activity is at the highest pace since February 2007.

The spike in home sales is attributed to buyers taking advantage of the first-time home buyer tax credit, in addition to lower home prices, better levels of affordability as well as record low interest rates. "We can't underestimate just how powerful a catalyst the first-time home buyer tax credit has been for the housing sector," said

Lawrence Yun, the national REALTOR® association's chief economist. "It's given buyers the confidence they needed to get off the fence and take advantage of extremely affordable housing conditions. The tax credit is allowing buyers to set aside any reservations about waiting for a better deal."

Now that the tax credit has been extended and expanded, potential buyers have until April 30 to have a contract in place.

"We are confident that recent actions by the federal government to extend conforming loan limits, especially in high-cost areas like Silicon Valley, as well as the extension and expansion of the home buyer tax credit, will help keep the market stable in our region," Silicon Valley Association of REALTORS® president Julia Truesdale Keady commented on the impact of the government incentives on the region. "These programs are a window of opportunity for serious buyers. Buyers now have a second chance, but they need to have a contract in place by April 30, 2010 in order to receive the tax credit."

Yet another incentive for buyers are the historically low interest rates. Mortgage interest rates last month were the third lowest on record dating back to 1971, according to Yun.

Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, which represents a seven-month supply at the current sales pace. Unsold inventory totals are 14.9 percent below a year ago.

"The supply of homes on the market is now at the lowest level in over two-and-a half years – we're getting closer to a general balance between buyers and sellers," Yun said.

The national median existing-home price for all housing types was $173,100 in October, down 7.1 percent from October 2008. Yun said low home prices are contributing to extremely favorable affordability conditions.

"With the abnormal drop in home prices over the past few years, the price-to-income ratio has fallen below the historic trend line," Yun said. "This is adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970, but prices are beginning to flatten and are poised to rise next year."

Liz Snow, California Building Industry Association president and CEO, cautioned that in California, housing production hasn't kept up with population growth and two years of record-low production could accentuate the supply/demand imbalance.

"According to the California Department of Housing and Community Development, California needs to be building around 230,000 units per year to keep up with population growth," said Snow. "Production in 2008 was just 65,000 units and this year will be below 40,000 units, so we could see a big swing in affordability levels as prices increase due to increased competition among buyers."



The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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