By Martin Crutsinger
AP Economics Writer
Washington — Sales of previously owned homes slipped slightly in October as the housing market continues to battle tough economic conditions including high unemployment and tight credit.
The National Association of Realtors reported Tuesday that sales of previously owned homes dropped 2.2 percent last month to a seasonally adjusted annual rate of 4.43 million units. The performance was weaker than had been expected. Economists at JPMorgan Chase had forecast that sales would rise in October to an annual rate of 4.60 million units.
The median price for a home sold in October was $170,500, down 0.9 percent from a year ago, as prices continue to be depressed by weak sales conditions and a huge overhang of unsold homes.
Sales had plunged to the slowest pace in 15 years in July, then posted gains in August and September before slipping back in October. Sales in October were 38.9 percent below their peak of 7.25 million units set in September 2005 during the height of the housing boom.
The Realtors group reported that the moratorium that many big lenders imposed on foreclosures may have dampened sales in October by introducing more uncertainty in the sales market. But a bigger problem, according to the Realtors group, is the tight lending standards that banks have put in place in the wake of record foreclosures.
“The dial has been tightened way too much” on lending standards, said Lawrence Yun, chief economist of the Realtors.
Yun forecast that sales of existing homes for the entire year will total 4.8 million units, which would be 7 percent below the 5.16 million homes sold last year, showing that the housing market continues to struggle with tight credit and unemployment that remains painfully high in the wake of the worst recession since the 1930s.
The forecast of 4.8 million sales would be the poorest performance since 1997 when 4.37 million homes were sold. Yun said he was looking for a modest rebound in 2011 as the labor market slowly improves. He forecast sales of previously owned homes would rise to 5.1 million units next year, capping a wild decade in which a housing boom pushed sales and home prices to record levels only to see a collapse starting in 2006.
Sales were down in all regions of the country in October. Sales fell 3.4 percent in the South, the largest decline of any region. Sales fell 1.9 percent in the West, 1.3 percent in the Northeast and 1.1 percent in the Midwest.
Risky mortgage practices and lax lending standards contributed to the housing bubble. Foreclosures have soared to record highs and remain a major drag on the housing industry. The concern is that problems with flawed foreclosure documents could keep buyers on the sidelines and further depress sales.
In a survey taken by the Realtors group in October, about 23 percent of agents said they had clients who were no longer interested in buying a foreclosed property because of uncertainty raised by the possibility of flawed documents.
“This has been a noisy period for the resale housing market, with the foreclosure mess creating great uncertainty and consternation among buyers and sellers and essentially interfering with the sales process,” said Jennifer Lee, senior economist at BMO Capital Markets.
Also weighing on the housing industry is a glut of unsold properties. For October, the Realtors reported that the inventory of unsold homes stood at 3.86 million units. That was a 10.5 month supply at the October sales pace, significantly higher than the six-month inventory that is considered a sign of a healthy housing market.