Sales of existing homes inched up by 0.8% in October to 6.34 million, carrying some of the momentum in September, when sales jumped by a significant 7.0%, according to data released by the National Association of Realtors on Monday.
Despite supply constraints and elevated prices, the small increase was in line with pending home sales in August, which surged by 8.05% month over month. Pending sales often take two months to become existing home sales.
One reason for such resilience in sales came from consumers’ fear of missing out on current low mortgage rates as interest rates are expected to increase late next year or in early 2023. That expectation has played into buyers’ purchasing decisions because of high inflation, reflected by an uptick in mortgage applications in recent weeks.
The supply of houses was steady at 2.4 months of inventory, far below the conventional six months of supply.
Low supply and relatively strong demand pushed the median price of homes to $353,900 in October, a slight increase from $351,200 in September. Although the median price has fallen from its summer peak at $362,800, it was still up by 13.1% compared to a year ago.
High prices continued to deter first-time buyers, who accounted for only 29% of all sales of existing homes in October, down from 32% a year ago. On the other hand, the proportion of sales by investors jumped to 17% from 13% in September and from 14% a year ago as the market remained a seller’s market.
There will certainly be more demand than supply in the last two months of the year and at least in the first half of next year with interest rates expected to be unchanged. Recent data on housing starts and permits also pointed toward a slower growth for new housing supply because of supply chain bottlenecks and labor shortages that will last well into next year.
As a result, we expect that home sales will stay above the pre-pandemic level while prices remain elevated for the next several months.