October Existing Sales Hit 6,850,000

Existing home sales reported by the National Association of Realtors hit 6,850,000 units for the month of October. This figure came in almost 300,000 units above the September report, which increased by 21% from 2019’s 6,540,000 units. This is not the highest recorded amount, which dates back to late 2005 when it reported 7,260,000 existing homes sold.

The housing market trajectory continues to escalate, creating a palpable economic gap between buyer’s ability to pay and the number of properties for sale that are affordable.

Other important metrics supporting this market are reflected in the days-on-market figure, which has fallen from 36 days to 21 days on a year-over-year basis. In addition, the number of cash buyers continues to track in the percentage of sales overall, coming in at 19%.

The question remains, is this a housing bubble, a burst or a new benchmark?

In some cases the market will take years to fill in the gap that exists in inventory satisfying the buyer demand and the available inventory for sale including new homes.

As long as inventory is short and mortgage rates remain at these historic lows, we will continue to see a healthy number of buyers coming into the market.

The recent pandemic created both greater demand and also an economic choke-hold that seemed to force some buyers into the market and then hold others back from getting into the market. But as the economy continues to recover, new buyers will move and are moving into this very strong real estate economy.

As the unusual buyer demand created by the pandemic slows down and the number of buyers coming into the market refuse to pay higher prices, we will see the real estate market return to healthy levels as reflected in the days on market.

The available inventory for sale has hit an all-time low of 2.5 months supply. This is a 10% drop from the 2.7-month supply of September and from the 3.9-month supply reported in October of 2019. The shortage, along with the low interest rates, is encouraging builders to fill in this gap to be filled through new construction. The problems being faced by builders are the shortage of materials and the shortage of skilled labor.

What was clearly unsettling was the number of sales of existing homes, which caught everyone by surprise. But these numbers are clearly reflecting the frenzy of buyers being flushed out due to the pandemic and low mortgage rates.

Clearly the increase in home prices of 15.5% year-over-year from 2019 is unsustainable but it is explainable.

The tenure of homeowners living in their houses has risen to 10 years, which represents twice the time recorded back in 2007 and 1985. In addition, we will continue to see stronger demand due to the low mortgage rates that make home ownership possible to first-time buyers but not necessarily in locations that would be their first choice.