Key Takeaways:
- The annual pace now stands at 6.3 million units;
- Average sales prices of single- family homes continue to climb, reaching $373,000 in September;
- The supply of existing homes for sale stands at just 2.4 months compared to a 3.3-month average for the 2018-2019 period.
By Manuel Gutierrez, Consulting Economist to NKBA
Sales of existing homes rose further in September, increasing by a substantial 7% to 6.3 million units at an annualized rate. Figure 1 shows that this is just 100,000 fewer units than were sold in September of last year.
The sales pace in each of the latest three months is virtually the same, month for month, as last year.
The sales dip caused by COVID-related government restrictions of business can be seen in the “V” shaped drop and recovery between March and July 2020.
Demand for homes remains strong, with a robust sales pace maintained throughout this year, despite rising house prices and a relative scarcity of homes for sale. It is this strong demand that has led to ever-increasing prices for homes that are listed on the market.
In fact, inventory of homes for sale has dropped for the second consecutive month, to 1.27 million houses (Figure 2). Despite selling higher prices, there is a reluctance by homeowners to put their houses on the market, limiting the number available for sale. One reason is that while it might be easy to sell, it’s difficult to buy for the same reasons: high prices and limited inventory.
The current sales pace brings the existing supply to just 2.4 months of sales (Figure 2.) The supply has hovered between 2.4 and 2.6 months since April. This is almost one month less than the average of 3.3 maintained over the period from 2018 to 2019.
Short of more owners deciding to sell, the net supply of homes can only increase with a higher pace of new home construction or by the conversion of existing commercial buildings to residential spaces.
The phenomenon of rising home prices has been occurring for several years. By September, the average price of a single-family house had reached $373,000, up 12% from a year ago (Figure 3, left panel).
Sales prices of single-family homes reached an average of $373,000 in September, 12% higher than the year-ago period.
Housing prices have increased for each of the four regions. The highest gains were seen in the Midwest and the South, with each up 13% over the last year.
These two regions also have the lowest average sales price.
The West posted the highest average price, with the typical home in this region selling for just under $500,000. Prices in this region posted the smallest yearly gain, but were still a substantial 9% higher than in the previous year.
Industry experts do not anticipate home prices to fall in the near future. The supply of homes will remain constrained over the next year or so, as builders do not have the ability to increase their production in any significant numbers due to shortages of materials and labor.
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