Year over year, home sales were down 5.8% from October 2020, marking the cyclical peak of the pandemic spike in home purchases.
NAR chief economist Lawrence Yun said this year’s sales were on track to surpass 6 million households, which would be the best performance since 2006.
“Home sales remain resilient, despite low inventories and growing affordability challenges,” Yun said. “Inflationary pressures, such as rapidly rising rents and rising consumer prices, may cause some potential buyers to seek the protection of a fixed, constant mortgage payment.”
Yet the shortage of homes available for sale continues to drive up home prices, making home buying even less affordable for first-time buyers and low-income buyers.
The median price of existing homes for all housing types in October was $ 353,900, up 13% from a year ago. That marks 116 consecutive months – or more than nine and a half years – of year-over-year increases, the longest streak on record.
Inventory remains tight
The inventory shortage continues to weigh heavily on the housing market and it doesn’t appear to be stopping anytime soon.
At the end of October, there were 1.25 million homes available for sale, down 12% from a year ago and slightly lower than September, NAR reported.
At the current rate of sales, the market has a housing supply of 2.4 months. Typically, a balanced market has a housing supply of around 6 months.
“While the competition for homes has eased somewhat since the craziness of the months earlier this year, the competition is still fierce and prices continue to rise at double-digit rates,” said Robert Frick, business economist at Navy Federal Credit Union.
Rising home prices have made it especially difficult for low-income buyers as there is more inventory available in the upper end of the market, Frick said.
In October, sales of homes priced between $ 250,000 and $ 500,000 were down 2% from a year ago as there simply weren’t enough homes to meet demand. Requirement. Meanwhile, sales of homes priced between $ 500,000 and $ 750,000 are up 18% from a year ago and those costing over $ 1 million are up 31%.
This highlights the need to bring more homes to market – both from existing owners and new builds – to complement and replenish the country’s aging housing stock, said Joel Kan, associate vice president of economic forecasting and industrial. for the Mortgage Bankers Association.
More investors and liquidity in the market
Another factor contributing to the rise in prices is that more and more people are buying homes for cash, a process commonly used by buyers looking for investment property for rent or for a vacation home.
Almost a quarter of homes purchased in October were all cash transactions, according to the NAR report. This is up from 19% a year ago. And homes purchased as vacation homes or for investment property accounted for 17% of homes purchased in October, up from 14% a year ago.
“Among some of the workforce, there is a continuing trend for flexibility to work anywhere, which has contributed to increased sales in some parts of the country,” Yun said. “Record-breaking stock markets and the highest house prices of all time have helped to dramatically increase total consumer wealth and, coupled with extensive remote working flexibility, increased demand for housing in holiday regions. . “
As a result of this increased financial strength, home buyers who finance the purchase of a home with a mortgage and first-time home buyers continue to struggle to be competitive in the marketplace. First-time buyers only represented 29% of sales in October, compared to 32% a year ago.
“All buyers who are competing to buy with mortgages, especially if they have FHA, VA mortgages that have more complex appraisal processes, may find it difficult to compete with all the cash,” he said. Yun said.