Home Sales Defy Expectations, Crushing Another 14 Year Record

The hot home sales market continued unabated in October. The National Association of Realtors® (NAR) reports that existing home sales grew for the fifth consecutive month and 72 percent of homes that sold were on the market for less than a month.

Single-family houses, townhouses, condos, and cooperative apartments sold in October at a seasonally adjusted annual rate of 6.85 million units. This was an increase of 4.3 percent from the September pace and 26.6 percent above the rate of 5.41 million sales in October 2019.

Single-family home sales rose 4.1 percent to a seasonally adjusted annual rate of 6.12 million, up from 5.88 million in September. This was 26.7 percent above the pace a year earlier. The annual sales rate for existing condominium and co-ops was up 5.8 percent and 25.9 percent from the two earlier periods to 730,000 units.

The overall sales figure was well above predictions. Analysts polled  by Econoday had expected the annual sales rate to be in a range 6.300 to 6.680 million with a consensus of 6.470 million while Trading Economics had a forecast of 6.5 million.

"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," Lawrence Yun, NAR's chief economist said.

While coronavirus-induced shutdowns hindered virtually all markets, Yun says the housing industry has mounted an impressive rebound. "The surge in sales in recent months has now offset the spring market losses," he said. "With news that a COVID-19 vaccine will soon be available, and with mortgage rates projected to hover around 3 percent in 2021, I expect the market's growth to continue into 2021." He forecasts existing-home sales to rise by 10 percent to 6 million in 2021.

The median existing-home price was $313,000, 15.5 percent more than the October 2019 median of $271,100, and prices increased in every region. Last month's national increase marks 104 straight months of year-over-year gains. The median existing single-family home price was $317,700, 16.0 percent annual appreciation, and the median existing condo price was $273,600, up 10.3 percent from a year ago.

Inventories continue to decline. There were 1.42 million homes available for sale at the end of October, enough to last 2.5 months at the current rate of sales and a record low. This is 2.7 percent fewer houses than at the end of September and a decline of 19.8 percent from the 1.77 million homes for sale a year earlier. That latter figure represented a 3.9-month supply.

"Homebuilders' confidence has soared even though the actual production has not," Yun said. "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."

NAR recently issued its quarterly Metropolitan Median Area Prices and Affordability Report which showed a price increase in each of the 181 metro areas it tracks. In sixty-five percent that appreciation was in double-digits. Yun says replenishing the short supply of homes would help decelerate rising costs and improve market affordability.

First-time buyers were responsible for 32 percent of sales in October, up from the 31 percent in both September 2020 and October 2019. Individual investors or second-home buyers purchased 14 percent of homes that sold during the month and all-cash sales accounted for 19 percent of transactions. Less than 1 percent of sales were of distressed properties - foreclosures and short sales.

"Faced with many uncertainties in 2020, the real estate industry has been able to meet surprisingly strong homebuying demand and help lead our country's economic recovery," said NAR President Charlie Oppler. "As we continue to help consumers secure housing and property, we will also remain vigilant in working to expand housing options, equality and affordability for all who are entering the marketplace."

Median home prices increased at double-digit rates in each of the four major regions compared to the previous October. Existing-home sales in the Northeast climbed 4.7 percent to an annual rate of 900,000, a 30.4 percent increase from a year ago. The median price rose 20.2 percent to $356,500.

Existing-home sales jumped 8.6 percent in the Midwest to an annual rate of 1,640,000, up 28.1 percent from a year ago. The median price was $243,500, a 16.7 percent gain.

Sales in the South were up 3.2 percent and 26.5 percent from the two earlier periods to an annual rate of 2.91 million units. The median price grew by 15.7 percent to $272,500.

The West posted sales growth of 1.4 percent to an annualized 1,400,000, putting its rate up 22.8 percent year-over-year. The median price increased 15.1 percent to $467,800.