Home sales in October continued to be weighed down by supply shortages and the ongoing recovery from hurricanes in Florida and Texas.
Existing-home sales increased 2% in October from a month earlier to a seasonally adjusted annual rate of 5.48 million, the National Association of Realtors said Tuesday. But sales dipped 0.9% from the same month a year earlier, the second consecutive decline on an annual basis.
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"The housing market largely remains stuck in the same, predictable rut it has been in for the past two years or so" of high demand and low inventory, said Svenja Gudell, chief economist at home-listing website Zillow.
Home sales in areas hit by hurricanes, including Houston, Orlando and other major markets, showed gains from previous months, helping to drive the monthly increase in October, according to Lawrence Yun, NAR's chief economist.
Sales in the south rose 1.9% from September but remained 1.8% lower than a year ago. Economists said pent-up activity from closings that were delayed from Hurricane Harvey in August and Hurricane Irma in September helped boost sales activity.
The storm-battered south is "the weakest link when it comes to existing-home sales in the nation," said Chris Rupkey, chief financial economist at financial firm MUFG. "It's going to take some more time to recover."
Housing inventory decreased 3.2% in October and is 10.4% lower than a year ago, having fallen year-over-year for 29 consecutive months, according to NAR.
It would take just 3.9 months to exhaust the supply of homes on the market, the lowest October reading since 1999, the year NAR started tracking the data.
The supply shortage, in turn, is driving prices higher. The median price of homes sold last month rose to $247,000, up 5.5% from a year earlier.
Home sales are currently "significantly below the potential of the market," said Mark Fleming, chief economist at title insurer First American. He estimates sales should be more than 7% higher today based on easing credit standards, low interest rates, high employment and income growth.
The reluctance of owners to put their homes on the market given the lack of inventory is one reason for low sales. "It's hard to want to bring your home to market as a seller if you fear being able to find something to buy," Mr. Fleming said.
Economists said a tax overhaul could inject additional volatility into the market in the coming months. Proposed changes to cap the mortgage interest deduction at $500,000 from the current $1 million and reduce or eliminate state and local tax deductions could deal a particularly big blow to pricier coastal markets that have been showing some of the strongest sales activity lately.
As bills move forward in the House and Senate, it could create a rush of homeowners looking to take advantage of provisions that may be grandfathered in, even as others pull back for fear of being hurt by the changes down the road.
"It's pretty radical what's being proposed here," Mr. Rupkey said. "There's going to be some fallout if it goes through."
Sharon Nunn contributed to this article.
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(END) Dow Jones Newswires
November 21, 2017 17:05 ET (22:05 GMT)