October marked the fifth straight month of existing-home sales growth, with sales reaching a seasonally adjusted annual rate of 6.85 million, according to the National Association of Realtors.
That pace is up 4.3% from September and 26.6% from October 2019. Existing-home sales have now seen month-over-month improvement every month since May, highlighting the extraordinary hardiness the residential market has enjoyed since initial tumult at the onset of the COVID-19 pandemic.
“Considering that we remain in a period of stubbornly high unemployment relative to pre-pandemic levels, the housing sector has performed remarkably well this year. … The surge in sales in recent months has now offset the spring market losses.” said Lawrence Yun, NAR’s chief economist.
October’s sales rate was the highest seen since November 2005. Single-family sales grew 4.1% month to month and 26.7% annually to a rate of 6.12 million units. Condo sales rose 5.8% monthly and 25.9% yearly to a pace of 730,000.
Rapid sales growth continues to put upward pressure on home prices, with the median existing-home price for all housing types at $313,000 in October. That’s up 15.5% annually, making October the 104th consecutive month of year-over-year median price gains.
The median existing single-family home price was $317,700, up 26.7% from October 2019, while the median existing condo price was $273,600, an annual increase of 10.3%.
Soaring sales also continues to strain the nation’s already minuscule supply of for-sale homes, with total housing inventory at the end of October at 1.42 million units. That’s down 2.7% monthly and down 19.8% annually, bringing unsold inventory to a 2.5-month supply at the current sales pace, the lowest on record. Supply scarcity, of course, is helping fuel competition and drive up prices, accelerating price growth even more.
“One ongoing hurdle for many prospective buyers is that housing inventory is shrinking,” noted Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association (MBA). “The 2.5-month supply is a record low, and continues to push home prices higher. This poses challenges for many potential first-time buyers and lower-income buyers.”
“Homebuilders’ confidence has soared even though the actual production has not,” said Yun. “All measures, such as reduction to lumber tariffs and expansion of vocational training, need to be considered to significantly boost supply and construct new housing.”
Despite the supply side challenges, experts are confident that the strong pace of sales will sustain into next year.
“With news that a COVID-19 vaccine will soon be available, and with mortgage rates projected to hover around 3% in 2021, I expect the market’s growth to continue into 2021,” said Yun, who forecast that existing-home sales will grow 10% to hit 6 million next year.
“The housing market has only strengthened since the pandemic-induced lows in the spring,” added Kan. “MBA’s mortgage application data show similar trends, with early signs that the increase in sales will continue. Purchase applications have now increased year-over-year for more than six months.”