NEW YORK (CNNMoney.com) -
The pace of home sales slowed more than economists' expectations in October, according to the latest reading showing a softening of the nation's real estate market.
The National Association of Realtors reported Monday that sales of previously owned homes fell to an annual rate of 7.09 million in October, down from the revised 7.29 million pace in September. Economists surveyed by Briefing.com had forecast that sales would slip to a 7.20 million rate in October.
Still the drop was from the second strongest month in history. October's sales rate would have been a record as recently as March of this year.
But every month since March has seen a stronger sale pace, so the white hot sales pace has clearly slowed some in recent months. The Realtors' report follows reports earlier this month on housing starts, builders' confidence and third-quarter home prices which all suggested a weakening real estate market.
"You wouldn't disagree we're in the tipping zone right now. With (mortgage) rates going up, we've had the last hurrah," said Nick Buss, senior vice president, PNC Real Estate Finance. Still Buss sees a gradual slowdown in the housing market ahead, rather than the popping of a real estate "bubble" feared by some economists.
"From my perspective, it's still on track for the slow release of the air out of the balloon rather than a rapid popping," he said.
The statement from the Realtors trade group also predicted a relatively soft landing ahead.
"Housing activity has peaked and is coming down a bit, and we expect further cooling in the coming months. We feel confident that housing is landing softly as (mortgage) rates continue to rise," said a statement from David Lereah, NAR's chief economist.
More houses for sale
The supply of homes on the market also climbed, according to the report, reaching 2.9 million homes, or nearly a five-month supply. There was less than a four-month supply of homes on the market in January of this year.
The average 30-year fixed-rate mortgage in October was 6.07 percent, according to financing company Freddie Mac, up from 5.77 percent in September. October's average marked the first time it has been over 6 percent for a month since July 2004. Rates have since risen further, climbing to 6.33 percent in November, the highest monthly rate since July 2002.
Even with higher mortgage rates raising the cost of financing and cutting into home shoppers' buying power, the NAR's report showed the typical price continued to climb. The median price, which reflects the point at which half the homes sold sell for more and half sell for less, was $218,000, up 2.3 percent from September, with every region showing a gain expect the Midwest, which had a slim $1,000 decline.
Year-over-year median prices are up 16.7 percent, with each region posting double-digit percentage gains over that period.
"In some of the hotter markets prices may ratchet back 10 to 20 percent over the next year. But those are markets where prices have doubled in the last five years," said Buss. "I don't see a decline in prices nationally, just a slowing in appreciation to a more normal pace."
The existing home sales report is more of a trailing indicator because it is based on figures selected when a sale closes, typically one or two months after a purchase contract is signed and financing is locked in.
New home sales, which will be reported Tuesday by the Census Bureau, is more of a leading indicator since it is based on when the home sales contract is signed. Economists are looking for new home sales to fall to an annual 1.20 million pace from 1.22 million in September.
For a look at the what a softer housing market might mean for consumer spending, click here.
For a look at the outlook for housing prices, click here