- Pending home sales fell slightly in October yet still remained higher when compared to last year’s October
- According to National Association of REALTORS®, mounting bidding wars render highest-ever October median home price
Pandemic homebuyers may have crashed against the affordability tape in October. According to the National Association of REALTORS® (NAR), pending home sales, one of the more accurate predictor of buyer sales activity, in October dropped -1.1% m/m, likely due to increasing bidding wars that make existing home sales unaffordable.
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Lawrence Yun, chief economist with NAR, said, “The housing market is still hot, but we may be starting to see rising home prices hurting affordability.”
Contradictions in the housing market have been setting the stage for bidding wars. Mortgage interest rates remained at near historic lows in October at the same time that the supply of homes for sale hit another record low of just 2.7-month at the current sales pace. (A six-month home supply is considered to be the standard-bearer for a balanced market.)
The October’s housing market’s complex equation of record low interest rates + too much demand for the too low home inventory + over-the-top competition + too-common bidding wars for scarce available housing units that, in turn, =ed too high home prices, the highest-ever October median price of an existing home sale price of $313,000, a +16% uptick annually.
“The combination of these factors – scarce housing and low rates – plus very strong demand has pushed home prices that are making it difficult to save for a down payment, particularly among first-time buyers, who don’t have the luxury of using housing equity from (another home) sale to use as a down payment,” said Yun.
On an annual basis, October pending sales across the nation continued to exceed last year’s pending sales level by +20.2%. Regionally, pending home sales looked like this:
- Northeast – -5.9% m/m but +18.5% y/y
- Midwest – +0.7% m/m but +19.6% from October 2019
- South – +0.1% m/m but +21.0% y/y
- West – flat m/m but +20.8% y/y
Sales of newly built homes have been the beneficiary of the pandemic-induced existing home sales frenzy. According to the US Census, new home sales were up more than +40% this October compared to last October. Demand is so high in this newly built market sector that the number of pending sales for new homes that haven’t even been started yet was up more than +90% y/y.
Thanks to the National Association of REALTORS®, the US Census Bureau and CNBC.
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