Vacation Homes Help Fuel Existing Sales Surge

Existing home sales rose again in September and are now blowing the doors off last year's numbers. The National Association of Realtors® says sales of single-family homes, townhomes, condominiums, and co-ops, rose 9.4 percent from August to a seasonally adjusted annual rate of 6.54 million units in September. After four straight months of increasing sales, the seasonally adjusted rate is now 20.9 percent higher than in September 2019.

Single-family home sales rose 9.7 percent month-over-month to a seasonally adjusted rate of 5.87 units and are now 21.8 percent higher than a year earlier. Existing condominiums and co-ops sold at annual rate of 670,000 units, increasing 6.3 percent and 13.6 percent from the two earlier periods.

Analysts had expected sales to remain on a winning streak but were looking for an annual rate of 6.2 million sales. Forecasts of those polled by Econoday ranged from 5.8 million to 6.4 million units, all falling short of the actual number.

"Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season," said Lawrence Yun, NAR's chief economist. "I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home."

The median existing-home price for all housing types in September was $311,800, up 14.8 percent from the September 2019 median of $271,500, marking 103 straight months of year-over-year gains. The median existing single-family home price was $316,200, a 15.2 percent annual gain, and the median existing condo price was $272,700, up 9.9 percent.

There were 1.47 million available homes for sale at the end of September, 1.3 percent fewer than in August and down 19.2 percent from the 1.82 million stockpile a year ago.  The unsold inventory is estimated at a 2.7-month supply at the current sales pace, down from 3.0 months in August and 4.0-months in September 2019. A six-month supply has traditionally been cited by NAR as a balanced market.

"There is no shortage of hopeful, potential buyers, but inventory is historically low," Yun said. "To their credit, we have seen some homebuilders move to ramp up supply, but a need for even more production still exists."

Sales in vacation destination counties have seen a strong acceleration since July, with a 34 percent year-over-year gain in September. Yun says, "The uncertainty about when the pandemic will end coupled with the ability to work from home appears to have boosted sales in summer resort regions, including Lake Tahoe, mid-Atlantic beaches (Rehoboth Beach, Myrtle Beach), and the Jersey shore areas. Additionally, a recent NAR study confirms that many Americans continue to seek new living situations due to the pandemic.

Properties typically remained on the market for 21 days in September - an all-time low - seasonally down from 22 days in August and from 32 days in September 2019. Seventy-one percent of homes sold in September 2020 were on the market for less than a month.

First-time buyers were responsible for 31 percent of sales during the month, down from the 33 percent in both August 2020 and September 2019 while individual investors or second-home buyers accounted for 12 percent of September's sales. Eighteen percent of sales were all-cash. Only 1 percent of sales were foreclosures or short sales.

The four-month winning streak extends to all four regions and each is seeing annual price gains in the double digits. The strongest gains were in the Northeast where existing-home sales jumped 16.2 percent to an annual rate of 860,000, a 22.9 percent increase from a year ago. The median price in the Northeast was $354,600, up 17.8 percent from September 2019.

Existing-home sales grew 7.1 percent in the Midwest to an annual rate of 1,510,000 and growth of 19.8 percent from a year ago. The median price in the Midwest rose 14.8 percent to $243,100.

The South saw sales rise 8.5 percent to an annual rate of 2.80 million in September, a 22.3 percent annual increase. The median price rose 13.0 percent to $266,900.

The most modest increase was a 9.6 percent change in the West. Sales there were at an annual rate of 1,370,000, an 18.1 percent increase from a year ago. The median price was $470,800, up 17.1 percent from September 2019.