With just over a month remaining, 2018 hasn’t been especially kind to the existing-home sales market. Most of the months in 2018 have had fewer sales than in 2017, but the latest report bucks that trend. According to the National Association of Realtors ®, existing-home sales in October were higher than in 2017, which is the first increase seen in six months.
Three of four major U.S. regions saw gains in sales activity last month (only the Midwest saw a decline in existing-home sales). According to the NAR, total existing-home sales (completed transactions that include single-family homes, townhomes, condominiums and co-ops) increased 1.4 percent from September to a seasonally adjusted rate of 5.22 million in October. Even with this increase, 2018 existing-home sales are still down 5.1 percent from a year ago.
In a news release announcing the latest data, Lawrence Yun, the NAR’s chief economist, suggested increasing housing inventory has brought more buyers to the market. “After six consecutive months of decline, buyers are finally stepping back into the housing market,” he said. “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.”
October also saw increases in the median sale prices compared to last year.The median existing-home price for all housing types in October was $255,400, which is up 3.8 percent from the $246,000 price seen in October 2017. This increase is hardly a surprise. Monthly year-over-year gains in price have been steady for more than six years. October’s price increase marks the 80th straight month of year-over-year gains.
The report had mixed news on total inventory. Year over year, there was more available inventory in October 2018 than in October 2017. However, the inventory was lower than in the previous month. Total housing inventory at the end of October stood at 1.85 million, which is higher than than the 1.80 million from last year, but lower than the 1.88 million seen in September. Similarly, unsold inventory is at a 4.3-month supply at the current sales pace, down from 4.4 last month and up from 3.9 months a year ago.
Nearly half (46 percent) of the homes sold in October were on the market for less than a month. The typical home in October sold in 33 days. This is slightly longer than in September but faster than what was seen during the same time period last year.
The changing market conditions may be linked to rising interest rates. The report notes that based on data from Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage increased to 4.83 percent in October from 4.63 percent in September. This is significantly higher than rate the average commitment rate for all of 2017, which was 3.99 percent.
The risk presented by rising rates is something that concerns analysts at the NAR. The effects can be seen in the decline in first-time homebuyers. The NAR reports that first-time buyers were responsible for 31 percent of sales in October, which is lower than last month and a year ago. Both were periods when first-time buyers represented 32 percent of sales.
“Rising interest rates and increasing home prices continue to suppress the rate of first-time homebuyers. Home sales could further decline before stabilizing. 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,” said Yun according to a press release.
The NAR may want to see the Fed hold interest rates steady, but the Federal Reserve will be hard pressed to change course at the present moment. The latest numbers from the Bureau of Economic Analysis suggests that the GDP grew by 3.5 percent in the third quarter of 2018, suggesting the economy is strong enough to handle another interest rate increase.
For more real estate statistics, read this article with statistics taken from real estate consumer surveys in 2018.