Inventory Woes Aren’t Slowing Down Home Sales
Existing-home sales fared strongly in October even as buyers continued to complain there aren’t enough homes on the market. Existing-home sales, which are completed transactions for single-family homes, townhomes, condos, and co-ops, increased by 0.8% in October compared to September, the National Association of REALTORS® reported Monday. Compared to a year ago, however, sales are down 5.8%.
Meanwhile, the inventory of unsold homes fell by 12% in October compared to last year. A limited supply of homes for sale remains an ongoing issue for the housing market against continued strong demand among potential home buyers.
“Home sales remain resilient, despite low inventory and increasing affordability challenges,” says Lawrence Yun, NAR’s chief economist. “Inflationary pressures, such as fast-rising rents and increasing consumer prices, may have some prospective buyers seeking the protection of a fixed, consistent mortgage payment.”
Mortgage rates remain low, although rates are rising. The 30-year fixed-rate mortgage averaged 3.07% in October, up from 2.9% in September, according to Freddie Mac.
Here’s a closer look at key housing indicators from NAR’s latest housing report:
- Home prices: The median existing-home sales price rose 13.1% year over year to $353,900. Prices climbed in all four major regions of the U.S.
- Housing inventories: Total housing inventory at the end of October was 1.25 million units, down 0.8% compared to September. Unsold inventory sits at a 2.4-month supply at the current sales pace.
- Days on the market: Eighty-two percent of homes sold in October were on the market for less than a month. Properties typically remained on the market for 18 days in October, down from 21 days a year ago.
- First-time buyers: First-time buyers comprised 29% of sales in October, down from 32% a year ago.
- Investors and second-home buyers: Individual investors or second-home buyers comprised 17% of sales in October, up from 13% in September and from 14% in October 2020, NAR reports. Investors and second-home buyers tend to make up the biggest bulk of all-cash sales, which accounted for 24% of transactions in October.
- Distressed sales: Foreclosures and short sales accounted for less than 1% of sales in October, equal to October 2020.
A Regional Look at Home Sales
Two of the four major regions of the U.S. posted month-over-month increases in existing-home sales last month. Still, home sales remain strong in most parts of the country even as housing inventories remain low.
“Among some of the workforce, there is an ongoing trend of flexibility to work anywhere, and this has contributed to an increase in sales in some parts of the country,” Yun says. “Record-high stock markets and all-time-high home prices have worked to significantly raise total consumer wealth and, when coupled with extended remote work flexibility, elevated housing demand in vacation regions.”
Here’s how existing-home sales fared across the country in October:
- Northeast: Sales dropped 2.6% in October, reaching an annual rate of 750,000. That marks a 13.8% decline compared to October 2020. Median price: $379,100, up 6.4% from one year ago.
- Midwest: Sales increased 4.2% to an annual rate of 1.5 million in October, a 6.3% decrease compared to a year ago. Median price: $259,800, up 7.8% from October 2020.
- South: Sales rose 0.4% in October, posting an annual rate of 2.78 million, a 3.5% decrease compared to last year. Median price: $315,500, a 16.1% increase from a year ago.
- West: Sales remained stable in October compared to September, staying at an annual rate of 1.31 million. That is down 5.1% from one year ago. Median price: $507,200, up 7.7% from October 2020.