After six straight months of declines, the number of existing-home sales crept back up in October, according to the latest data from The National Association of Realtors® (NAR).
Total existing-home sales are defined as completed transactions that include singe-family homes, townhomes, condominiums and co-ops that are already built; i.e., not new construction. The number of these home sales increased 1.4 percent from September to a seasonally adjusted rate of 5.22 million last month. Sales remain lower on a year-over-year basis with sales down 5.1 percent.
What’s behind the trend? NAR’s Chief Economist Lawrence Yun says greater housing inventory has brought more buyers to the market.
“After six consecutive months of decline, buyers are finally stepping back into the housing market,” said Yun in a statement published by NAR. “Gains in the Northeast, South and West — a reversal from last month’s steep decline or plateau in all regions — helped overall sales activity rise for the first time since March 2018.”
Median Price Continues to Rise
The median existing-home price for all housing types in October was $255,400, up 3.8 percent from October 2017 ($246,000). The increase marks the 80th straight month of year-over-year gains.
Despite the continued price gains, the rate of increase has slowed considerably, according to Yun.
“As more inventory enters the market and we head into the winter season, home price growth has begun to slow more meaningfully,” Yun said. “This allows for much more manageable, less frenzied buying conditions.”
Inventory is Up Since Last Year
According to NAR, total housing inventory at the end of October fell from 1.88 million in September to 1.85 million existing homes available for purchase. However, this represents an increase from 1.80 million in October 2017.
Homes typically spent 33 days on the market in October, up from 32 days in September but down from 34 days a year ago. Forty-six percent of homes sold in October were on the market for less than a month, NAR reports.
According to recent data from Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.83 percent in October from 4.63 percent in September. The average commitment rate for all of 2017 was 3.99 percent.
“Rising interest rates and increasing home prices continue to suppress the rate of first-time homebuyers. Home sales could further decline before stabilizing,” said Yun. “The Federal Reserve should, therefore, re-evaluate its monetary policy of tightening credit, especially in light of softening inflationary pressures, to help ease the financial burden on potential first-time buyers and assure a slump in the market causes no lasting damage to the economy.”
First Time Home Buyers
First time buyers accounted for 31 percent of sales in October, down from last month and a year ago (32 percent). NAR’s 2018 Profile of Home Buyers and Sellers revealed that the annual share of first time buyers was 33 percent.
“Despite this much-welcomed month over month gain, sales are still down from a year ago, a large reason for which is affordability challenges from higher interest rates,” said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota and broker at Edina Realty. “Prospective buyers looking for their dream home in this market should contact a Realtor® as a first step in the buying process to help them navigate this more challenging environment.”
Cash Sales Increase
All-cash sales represented 23 percent of home purchases in October, up from September as well as a year ago (21 and 20 percent, respectively). Individual investors, who often purchase homes through all-cash transactions, bought 15 percent of homes in October, up from September as well as a year ago (both 13 percent).
Distressed sales, which are a combination of foreclosures and short sales, represented 3 percent of sales in October (the lowest since NAR began tracking in October 2008). This figure remains unchanged from September and is down from 4 percent a year ago. Two percent of October sales were foreclosures and 1 percent were short sales.
Existing-Home Sales by Region
Existing-home sales in the Northeast increased 1.5 percent to an annual rate of 690,000 in October. This was 6.8 percent below last year’s rate. The median price in the Northeast was $280,900, which is up 3.0 percent from October 2017.
In the Midwest, existing-home sales dropped slightly, losing 0.8 percent from last month to an annual rate of 1.27 million in October. This figure represents a 3.1 percent overall decline from a year ago. The median price in the Midwest was $197,000, up 2.4 percent from last year.
Existing-home sales in the South gained 1.9 percent, putting them at an annual rate of 2.15 million in October, down 2.3 percent from October 2017. The median price for existing homes in the South was $221,600, up 3.8 percent from a year ago.
Existing-home sales in the West saw a 2.8 percent increase, putting them at an annual rate of 1.11 million in October, 11.2 percent below a year ago. The median price in the West was $382,900, up 1.9 percent from October 2017.
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