- Sales surging and prices rising since pandemic slump
- Big trend is exodus from big metros to suburbs
- Headwinds for real estate sector is inventory at lowest levels in almost 16 years
To say the very least, the housing market’s volatility since the outbreak of COVID-19 pandemic and its subsequent lockdowns in March has been off the charts. Other hardest hit industries, retail, restaurants, tourism, etc., can only be awed by the almost perfect V-shaped recovery of home sales.
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The combination of historically low mortgage rates, pent-up demand from Millennials, first-time buyers and downsizing Boomers, and a nearly persistent out-migration from larger metros to quieter and more spacious suburbs have fueled this recovery.
HOWEVER, there is a problem. The latest from the National Association of REALTORS® (NAR) indicates that sales of existing homes in September are unexpectedly down -2.2% m/m to a seasonally adjusted 5.38M units. Annually, the sales rate turns into just +3.9% y/y.
This result is unexpected because mortgage interest rates came in at 3.6%, down -1.1% from last year’s rate of 4.8%.
What’s the problem? Pricing. The median home price of existing homes is now $272,100, a gain of +5.9% y/y and the strongest annual price gain of existing homes since January of 2018. September is the 91st straight months or approximately seven years of median home sales price growth.
Adding to this price growth problem is inventory, or lack of it. Inventory supply dropped another -2.7% m/m to approximately 1.83M units for sale in September. This -2.7% inventory drop represents the fourth straight month of declines and results in a 4.1-month supply of homes for sale.
Know that low interest rates do not compensate for higher home prices… low inventory rates stimulate bidding wars to the tune of 56% of all offers, according to Redfin.
Thanks to CNBC, Redfin and the National Association of REALTORS®.