Existing home sales grew for the fifth consecutive month in October, up 4.3% from September to a seasonally adjusted annual rate of 6.85 million, according to a report from the National Association of Realtors on Thursday. Compared to last October, sales are up 26.6%.
“The surge in sales in recent months has now offset the spring market losses,” NAR Chief Economist Lawrence Yun said. “With news that a COVID-19 vaccine will soon be available, and with mortgage rates projected to hover around 3% in 2021, I expect the market’s growth to continue into 2021.”
Yun forecasts existing-home sales to rise by 10%, to 6 million in 2021. At the end of October, housing inventory totaled 1.42 million units, down 2.7% from September and down 19.8% from October 2019. Housing inventory is now at a record low of 2.5 months of supply.
Keller Williams Chief Economist Ruben Gonzalez said he expects home sales to continue to grow at a strong pace the rest of the year and into the first quarter of 2021. However, the low housing supply is still putting pressure on home prices.
“We have seen a lot of activity by builders in the second half of 2020, which gives us reason to think we may see inventory increase some in the first half of 2021, but price growth seems likely to remain in at least the high single digits for some time,” Gonzalez said.
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The median existing-home price in October was $313,000, up 15.5% year over year with price gains in every region, NAR said. Homes were on the market for an average of 21 days in October, even with September and down from 36 days in October 2019. 72% of homes sold were on the market for less than a month.
The increase in existing home sales reinforces the strength of the housing sector this year, said Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association.
“The 6.85 million unit sales pace was the highest since November 2005, and on an annual basis, sales were up a robust 26.6%,” Kan said. “The housing market has only strengthened since the pandemic-induced lows in the spring. MBA’s mortgage application data show similar trends, with early signs that the increase in sales will continue. Purchase applications have now increased year-over-year for more than six months.”
Zillow Economist Matthew Speakman said that there’s “red-hot competition” in the market, as there are few homes available, and lots of interest fueled by low mortgage rates and Millennials entering the market.
“This torrid growth in sales may ultimately be done in by an inventory crunch that’s only getting worse — it’s hard to keep setting sales records when there’s so little for sale — forcing a slowdown in transactions in the coming months,” Speakman said. “But with demand for housing as high as it is, it’s unlikely that a slowdown in sales will be substantial.”