Home sales dropped 3.4 percent in October, surprising housing economists and raising concern about the strength of the recovery especially since mortgage rates remaining below 4 percent for the third straight month, existing

According to Bloomberg, economists had forecast that existing sales dropped 2.7% in October at an annual rate of 5.40 million.

Economists had noted that after a 4.7% increase at an annual rate of 5.55 million in September, a pullback was likely..

Total existing-home sales 3.4 percent to a seasonally adjusted annual rate of 5.36 million in October from 5.55 million in September. Despite last month’s decline, sales are still 3.9 percent above a year ago (5.16 million).

The median existing-home price for all housing types in October was $219,600, which is 5.8 percent above October 2014 ($207,500). October’s price increase marks the 44th consecutive month of year-over-year gains.

Total housing inventory at the end of October decreased 2.3 percent to 2.14 million existing homes available for sale, and is now 4.5 percent lower than a year ago (2.24 million). Unsold inventory is at a 4.8-month supply at the current sales pace, up from 4.7 months in September.

The percent share of first-time buyers increased to 31 percent in October, up from 29 percent both in September and a year ago.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage stayed below 4 percent for the third consecutive month, declining in October to 3.80 from 3.89 percent in September. A year ago, the average commitment rate was 4.04 percent.

All-cash sales were 24 percent of transactions in October (unchanged from September) and are down from 27 percent a year ago. Individual investors, who account for many cash sales, purchased 13 percent of homes in October, unchanged from September but down from 15 percent a year ago. Sixty-two percent of investors paid cash in October.

Distressed sales⁵ – foreclosures and short sales – declined to 6 percent in October, which is the lowest since NAR began tracking in October 2008; they were 9 percent a year ago. Five percent of October sales were foreclosures and 1 percent were short sales. Foreclosures sold for an average discount of 18 percent below market value in October (17 percent in September), while short sales were discounted 8 percent (19 percent in September).

Regional Breakdown

October existing-home sales in the Northeast were at an annual rate of 760,000, unchanged from September and 8.6 percent above a year ago. The median price in the Northeast was $248,900, which is 1.3 percent above October 2014.

In the Midwest, existing-home sales declined 0.8 percent to an annual rate of 1.30 million in October, but are 8.3 percent above October 2014. The median price in the Midwest was $172,300, up 5.7 percent from a year ago.

Existing-home sales in the South decreased 3.2 percent to an annual rate of 2.14 million in October, but are still 0.5 percent above October 2014. The median price in the South was $188,800, up 6.2 percent from a year ago.

Existing-home sales in the West fell 8.7 percent to an annual rate of 1.16 million in October, but are still 2.7 percent above a year ago. The median price in the West was $319,000, which is 8.0 percent above October 2014.