Low mortgage interest rates and rent increases encouraged home buyers to cause an unexpected home sales rise of 1.4% in October, said the National Association of Realtors on Monday. September’s revised rate of 4.90 million went up to an annual rate of 4.97 million units against poll’s expectation of rate to fall to 4.8 million. Still, the increase did nothing as median existing home sales price was 4.7% lower last month from a year earlier. Buyers might view falling prices as a bad investment and may further hurt the already ailing housing market. Existing home prices are at the same late 1990s rate.
Further frustrating the housing market outlook is the rise of contract failures to 33% in October from September’s 18% – a result of mortgage applications rejections or appraisals at lower than sale’s negotiated price. Positive factory production and better consumer spending improved the U.S economy but falling home prices threaten to impede the recovery that has progressed slowly since the 2007-2009 recession. Economists believe recovery in the housing sector is still far without positive credit supply and stable prices.
Since 2008, the U.S. Federal Reserve has held almost zero short-term interest rates, its balance sheet expanded in an attempt for credit grants to businesses and households. It helped lower mortgage rates. Still, potential borrowers were unable to get a loan. Capital Economics’ Paul Diggle said that because lenders lately require a credit score of 700 and a deposit of 20% to grant a conventional mortgage, recovery in house pricing is still a few years away.