Home Sales Accelerate in September, Rising 9.4%
Forget toilet paper: the new hard-to-come-by commodity is a place to live.
Encouraged by the lowest interest rates ever recorded and flexible work-from-home policies, homebuyers are closing deals in record time and depleting the for-sale supply to all-time lows, according to the latest report from the National Association of Realtors.
Sales of existing homes in the U.S. rose to a seasonally adjusted annualized rate of 6.54 million in September, 9.4% more than in August and 21% higher than a year earlier, NAR said in a statement Thursday.
Homes were on the market for a median of 21 days—the fewest NAR has recorded since it started keeping track in 2011—and if sales continue at this pace, the supply would be exhausted in just 2.7 months, the shortest time period in the more than 20 years of NAR’s records on inventory. The median price was $311,800, barely changed from August and 14.8% above the same period last year.
While the housing market roared back after a crash earlier in the pandemic, some economists have warned about the possibility that an overheated market could lead to unsustainably high prices. Others have worried about overestimating the market’s underlying strength or how long the boom will last.
The 9.4% growth in September sales was an acceleration from the 2% growth in August, a sign residential real estate is still healthy despite the ailing COVID-19 economy. Meanwhile, the average rate on a 30-year fixed mortgage fell to yet another record low this week, reaching 2.80%, Freddie Mac said Thursday.
"Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season," Lawrence Yun, NAR's chief economist, said in a statement. "I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home."
NAR tracks single-family homes, townhomes, condominiums and co-ops. Breaking out just single-family homes, sales rose to a seasonally-adjusted annualized rate of 5.87 million in September, up 9.7% from August and 21.8% from September 2019. The median price for a single-family home was $316,200 in September, up 0.44% from August and 15.2% from a year earlier.
Low inventory is one of the headwinds threatening future growth, not only because demand is outstripping supply, but because of how quickly prices can rise to unsustainable levels. As a general rule, NAR considers a six months’ supply to indicate moderate price increases, and anything less than that to push prices up even faster. (The 2.7 months’ supply in September compares to 3 months in August and 4 months last September.)
Plus, mortgage applications, a leading indicator of sales, have begun to trend down. The Mortgage Bankers Association’s Purchase Index, a measure of applications for new homes, has fallen for four straight weeks and was down 6.9% from its recent seasonally-adjusted high in September, MBA data released Wednesday showed.
National Association of Realtors. "Existing-Home Sales Soar 9.4% to 6.5 Million in September." Accessed Oct. 22, 2020
Freddie Mac. "Mortgage Rates Continue to Trend Down." Accessed Oct. 22, 2020.
Mortgage Bankers Association. "Mortgage Applications Decrease in Latest MBA Weekly Survey." Accessed Oct. 22, 2020.