Home sales rebound, as prices continue to climb

Tight home inventory, which improved earlier in the year, worsened again in September and prices continued to climb, according to a report by the National Association of Realtors.

September saw a 7% monthly increase in existing home sales, which include single-family homes, townhouses, condominiums and co-ops. But sales are down 2.3% from a year ago, when there was an atypical increase in home sales due to the pandemic.

The median selling price of an existing home is up 13.3% from a year ago, to $ 352,800, marking 115 consecutive months – or nine and a half years – year-over-year price increases.

“Some improvement in supply over the previous months helped boost sales in September,” said Lawrence Yun, chief economist of NAR. “Housing demand remains strong as buyers likely want to insure a home before mortgage rates rise even further next year.”

The number of homes available for purchase at the end of September was down 0.8% from August and 13% from a year ago. Inventory is at a 2.4 month supply at current sales pace. A balanced market corresponds to a housing supply of around six months.

Yun said more stocks are expected to hit the market next year.

“As mortgage forbearance programs end and home builders ramp up production – despite supply chain hardware issues – we will likely see more homes on the market as early as 2022,” said Yun.

Depressed inventory levels continue to constrain the market, said Mike Fratantoni, chief economist and senior vice president of the Mortgage Bankers Association. But he added that MBA still predicts that existing sales will be at an annualized rate of 6.07 million this year, or 7% ahead of 2020.

“The gain in existing home sales in September reflects contracts signed earlier this summer,” he said. “MBA purchase requisition data showed an 8% gain in September, which speaks to growing demand for home purchases and supports further increases in sales in the months to come.”

The market remained fast in September, with properties typically staying on the market for 17 days, according to the NAR report. This is the same as in August and down from 21 days a year ago.

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Rising prices and low inventories continue to hurt first-time buyers as interest rates soar. The share of purchases by first-time buyers fell again in September, falling to 28% from 31% last year.

“First-time buyers are particularly affected by historically high home prices because they typically don’t have the savings to buy a home or the equity to offset such a purchase,” Yun said.