October Home Sales Plummet, More Renters On the Way?

By E-Renter Tenant Screening
Posted on November 24, 2010 under Housing Trends | Be the First to Comment

According to a report on CNNMoney.com, home builders had a terrible month in October, with new home sales falling 80% from the top of the boom five years ago. Commerce Department figures show sales dropped to an annual pace of just 283,000, down 8.1% from September.

Last October, the annualized sales rate was 430,000. This year’s figure represents a whopping 28.5% decline from 12 months ago. Experts had predicted 2010 sales in October to be around 314,000—and were surprised by the dismal showing.

The peak pace was set in July 2005, at 1.4 million sales, and despite attractive mortgage rates, sales remain sluggish as 2010 comes to a close. The total number of homes on the market has dropped 20% since October, 2009.

First-time buyers were more likely to jump into homeownership, without the burden of selling an existing home. Getting a mortgage is still a challenge, and many potential buyers are unable to obtain financing.

The chief economist for the National Association of Home Builders (NAHB) blames the lower home sales figures on a drop in the number of people forming households. Unemployment and the slow economy mean people are staying at home with their parents longer, moving in with friends, or not getting married.

Individuals who cannot get financing to buy a home, and those unwilling to risk taking on a long-term situation like homeownership in this shaky economy will continue to turn to the rental market. For many, renting continues to be a more viable option—especially with shorter-term leases. Landlords are responding by becoming more flexible with six-month or even month-to-month leases to accommodate changing needs.