Existing home sales hit nearly 10-year high

Existing home sales hit nearly 10-year high
© Getty Images

Sales of previously owned homes hit a nearly 10-year high in October as job creation and rising wages released a flurry of unexpected pent-up demand.

Existing-home sales, completed transactions that include single-family homes and townhouses, increased 2 percent to a seasonally adjusted annual rate of 5.6 million last month, the highest level since February 2007, and up from 5.49 million in September, the National Association of Realtors (NAR) said Tuesday.

ADVERTISEMENT

October’s sales pace is 5.9 percent above a year ago and surpasses June’s 5.57 million pace.

All major regions saw monthly and annual sales increases in October.

“October’s strong sales gain was widespread throughout the country and can be attributed to the release of the unrealized pent-up demand that held back many would-be buyers over the summer because of tight supply,” said Lawrence Yun, NAR chief economist.

“Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes,” Yun said.

The labor market's expansion and subsequent tightening of the workforce has boosted wage growth and has prompted a fall revival for the housing sector.

“The good news is that the tightening labor market is beginning to push up wages and the economy has lately shown signs of greater expansion," Yun said. "These two factors and low mortgage rates have kept buyer interest at an elevated level so far this fall," he said.

One of the hurdles in the housing market has been the lack of homes available for sale. 

Total housing inventory at the end of October declined 0.5 percent to 2.02 million existing homes available for sale, and is now 4.3 percent lower than a year ago, 2.11 million. 

Unsold inventory is at a 4.3-month supply at the current sales pace, which is down from 4.4 months in September.

The median existing-home price for all housing types in October was $232,200, up 6 percent from a year ago and marking the 56th consecutive month of yearly gains.

Meanwhile, interest rates had remained at historic lows before rising in the two weeks since the election. 

The average commitment rate for a 30-year, fixed-rate mortgage rose to 3.47 percent last month from 3.46 percent in September, according to Freddie Mac.

But post-election rates have ticked up to around 4 percent.

"We expect the trend in home sales to continue upward over the next year despite rising mortgage rates as solid job growth, rising wages and accelerating household formations offset the rise in rates," said David Berson, chief economist at Nationwide.

First-time buyers were 33 percent of sales in October, which is down from 34 percent in September.

All-cash sales, made mostly by investors, represented 22 percent of transactions in October, up from 21 percent in September but down from 24 percent a year ago. 

Distressed sales — foreclosures and short sales — moved forward to 5 percent in October, up from 4 percent in September but down from 6 percent a year ago.

Single-family home sales increased 2.3 percent to a seasonally adjusted annual rate of 4.99 million in October from 4.88 million in September, and are now 6.6 percent above a year ago.

Existing condominium and co-op sales were at a seasonally adjusted annual rate of 610,000 units in October, unchanged from September and a year ago.

Regionally, existing-home sales in the Northeast climbed 1.4 percent, grew 2.3 percent in the Midwest, 2.8 percent in the South and up 0.8 percent in the West.