Persistent Lack of Inventory Limiting Market Potential

According to the newest Existing-Home Sales housing snapshot covering the month of October published by the National Association of Realtors (NAR), existing-home sales dropped 4.1% month-over-month and 14.6% year-over-year. 

Existing sales, which includes completed transactions of single-family homes, townhomes, condominiums, and co-ops, again fell from September to a seasonally adjusted annual rate of 3.79 million units in October. On a yearly basis, that number is down from 4.44 million from numbers reported by the NAR in October 2022. 

“Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” said NAR Chief Economist Lawrence Yun. “Multiple offers, however, are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market.” 

Total housing inventory registered at the end of October was 1.15 million units, up 1.8% from September but down 5.7% from one year ago (1.22 million). Unsold inventory sits at a 3.6-month supply at the current sales pace, up from 3.4 months in September and 3.3 months in October 2022. 

Averaging all types of housing, the median home price in October settled above $390,000 at $391,800, a 3.4% increase year-over-year (up from $378,800). 

“While circumstances for buyers remain tight, home sellers have done well as prices continue to rise year-over-year, including a new all-time high for the month of October,” Yun said. “In fact, a typical homeowner has accumulated more than $100,000 in housing wealth over the past three years.” 

The typical property remained on the market for 23 days in October, up two days from September 2023 and stood static year-over-year. Sixty-six percent of homes sold in October were on the market for less than a month. 

First-time buyers were responsible for 28% of sales in October, up from 27% in September and identical to October 2022. NAR’s 2023 Profile of Home Buyers and Sellers found that the annual share of first-time buyers was 32%. 

All-cash sales accounted for 29% of transactions in October, unchanged from September but up from 26% in October 2022. 

Individual investors or second-home buyers, who make up many cash sales, purchased 15% of homes in October, down from 18% in September and 16% one year ago. 

Distressed sales—foreclosures and short sales—represented 2% of sales in October, virtually unchanged from last month and the previous year. 

Looking at the four major geographical regions of the country, existing-home sales in the Northeast dipped 4.0% from September to an annual rate of 480,000 in October, down 15.8% from October 2022. The median price in the Northeast was $439,200, up 7.5% from the previous year. 

At an annual rate of 930,000 in October, existing-home sales in the Midwest were unchanged from the prior month but down 13.9% from one year ago. The median price in the Midwest was $285,100, up 4.2% from October 2022. 

Existing-home sales in the South retracted 7.1% from September to an annual rate of 1.69 million in October, a decline of 14.6% from the previous year. The median price in the South was $357,700, up 3.5% from last year. 

In the West, existing-home sales decreased 1.4% from the prior month to an annual rate of 690,000 in October, down 14.8% from one year ago. The median price in the West was $602,200, up 2.3% from October 2022. 

Realtor.com Chief Economist Danielle Hale also commented on the report by saying: 

“Sales of existing homes dipped 4.1% further to a pace of 3.79 million in October, making it the lowest monthly pace since August 2010. On a yearly basis, home sales were down 14.6%, the smallest drop in 16 months. After surpassing the 7% threshold in August, mortgage rates were roughly steady in the low 7s until the last week of September. Despite the rise in pending home sales in September, the late month surge in mortgage rates, following the Fed’s September projections, may have disrupted the process for some potential buyers. Housing affordability continues to be a major headwind, and many potential buyers are likely caught in the tug of war between holding out and waiting for better pricing and mortgage rate conditions or rushing to beat potentially worse conditions. Although recent survey data from October show that three times as many consumers expected mortgage rates to rise in the next 12 months as expected them to fall, it seems that holding out was the decision for more potential buyers in recent months. 

The U.S. median existing home sales price continued to grow, gaining 3.4% to $391,800 in October. Following the unseasonal influx of newly listed homes in August, according to Realtor.com, September data showed a give-back, but October saw new listing declines shrink further, evidence that sellers are growing more accustomed to the high-rate environment, and the number of new for-sale options that buyers have to consider could be poised to increase in the months ahead, which are typically slower months for housing activity. Furthermore, although they are less common than one year ago, price reductions rose unseasonably in October, which could portend some weakening in home price gains in the months ahead. As down payments hit a new high in the third quarter, the stakes for today’s home shoppers are high.” 

Click here to view the report from the source. 

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