All four regions enjoy a fifth straight month of gains. By Manuel Gutierrez, Consulting Economist to NKBA

 

The housing market continues to expand, with sales of existing homes rising 4.3% in October to a 6.8 million unit annual rate. More dramatically, the October sales pace was nearly 27% above the same month last year.

Sales of existing homes have increased in each of the last five months. October sales were a very brisk 25% higher than their pace in the first quarter of this year, when the annualized rate averaged 5.48 million units. This is in sharp contrast to last year, when monthly sales throughout the year were relatively stable with no real trend evident. The line in the chart below representing 2019 makes that abundantly clear. The 5.4 million pace in October 2019 was just 4% higher than the first-quarter 2019 average.

On a year-to-date basis, a total of 4.6 million homes have been sold so far through October, up 2.4% over the same period last year.

Slicing the data geographically, home sales showed gains across all four regions. In fact, the regional pattern mimicked the national pattern, as it also registered five consecutive months of increasing sales. The increase was highest in the Midwest, growing by 8.6% to an annual rate of 1.64 million units.

The Northeast also displayed robust sales in October, up 4.3% to a rate of  900,000 units. However, this region accounts for only 13% of the nation’s existing home sales.

The largest region, the South, with 42% of home sales, had a 3.2% increase in October for an annual rate of 2.91 million units. Sales in the West registered the most modest increase, rising only 1.4% for the month, which translated into an annual rate of 1.4 million units.

While nationally, year-to-date sales were 2.4% ahead of last year’s pace, the regional results were split. Both the Northeast and the Midwest were running behind 2019 sales through October, with 12,000 fewer homes sold in the Northeast, 2.1% less below 2019, and 6,000 fewer homes sold in the West, off by 0.6%.

On the other hand, the other two regions — the Midwest and the South, which are the largest and account for seven in 10 existing homes sold in the U.S. — registered year-to-date sales increases. The Midwest sold 42,000 more homes this year, up 3.9%, while 83,000 more homes were sold in the South, a 4.3% gain.

There is a downside to the strong sales, though, and that is the reduction of inventory. In October, there were just 1.4 million existing homes for sale — 2.7%, or 40,000 fewer than were available in September. That level of inventory is only sufficient enough to cover 2.5 months of sales at the October rate.

The average selling price of an existing home rose by 0.6% to $345,000 in October, while the median price showed a similar gain to bring it to $313,000. Average home prices increased in three of the four regions, with the West the only exception.

A survey conducted by the National Association of Realtors revealed that about 25% of the existing homes sold in the second quarter were priced at $500,000 or more. This is considerably higher than the 15% of New Homes sold that are above that range.

Why are there more sales of existing homes at the high-end than new homes? A plausible reason is the difference in regional sales for existing and new homes. The table below shows that home prices for both categories are highest in the Northeast and West. The region with the lowest home prices is the South,  which accounts for almost 6 in 10 (59%) new homes sold. That alone is enough to bring the overall U.S. average down. The region accounts for a far lower percentage (42%) of existing home sales, so its impact on the country’s total is not as great.