Home Prices, Inventory Levels, and Sales All Make Improvements
According to the National Association of Realtors (NAR), the nation’s housing inventory fell from 1.88 million homes in September to 1.85 million in October. However, this was an increase from the 1.8 million homes that were on the market a year ago. This increase in year-over-year inventory is a welcome sign for a housing market that has been plagued by inventory shortages for months. At the current sales pace, unsold inventory could supply the market for 4.3 months, down from 4.4 months in September but up from 3.9 months in October 2017. The average home remained on the market for around 33 days in October; in comparison, homes stayed on the market for an average of 32 days and 34 days a month ago and a year ago, respectively. Of all the homes sold in October, 46 percent sold in less than a month.
Relief in Sight
The median existing-home price in October climbed 3.8 percent to $255,400. This is the 80th month in a row where home prices have increased year over year. But the winter season typically means a slowdown in the housing market. This, coupled with the slight inventory increase, means that price growth is expected to slow in the coming months. “This allows for much more manageable, less frenzied buying conditions,” according to Lawrence Yun, chief economist for NAR.
This will be welcome news to first-time buyers, a group that accounted for only 31 percent of the market in October. This is down 1 percent from both a month ago and a year ago. According to the NAR’s 2018 Profile of Home Buyers and Sellers, 33 percent of all home purchases in 2018 were made by first-time buyers. However, this group should account for a larger share of the market. Increases in interest rates and home prices are pricing first-time buyers out of the market. And their absence could lead to a further drop in sales activity before numbers stabilize. According to Yun, “The Federal Reserve should, therefore, re-evaluate its monetary policy of tightening credit, especially in light of softening inflationary pressures, to help ease the financial burden on potential first-time buyers and assure a slump in the market causes no lasting damage to the economy.”
Sales Going Up
Existing-home sales rose in October for the first time in six months. The increase in inventory is helping to fuel this growth. According to Yun, “Gains in the Northeast, South, and West—a reversal from last month’s steep decline or plateau in all regions—helped overall sales activity rise for the first time since March 2018.” Of all of October’s sales, only 2 percent were foreclosures, and only 1 percent were short sales. All distressed sales combined accounted for just 3 percent of sales in October, down from 4 percent a year ago. The number of distressed sales hasn’t fallen this low since NAR began recording the data back in October 2008.
Regional Home Sales
Northeast – Existing-home sales annual rate of 690,000; an increase of 1.5 percent from September but a decrease of 6.8 percent from October 2017.
Midwest – Existing-home sales annual rate of 1.27 million; a decrease of 0.8 percent from September and 3.1 percent from October 2017.
South – Existing-home sales annual rate of 2.15 million; an increase of 1.9 percent from September but a decrease of 2.3 percent from October 2017.
West – Existing-home sales annual rate of 1.11 million; an increase of 2.8 percent from September but a decrease of 11.2 percent from October 2017.