Existing-Home Sales Increased to 6.34 million in October

Median House Price Growth Decelerated for Fifth Consecutive Month

From the NAR: Existing-Home Sales Inch Up 0.8% in October

Existing-home sales increased in October, marking two straight months of growth, according to the National Association of Realtors®. Two of the four major U.S. regions saw month-over-month sales climb, one region reported a drop and the fourth area held steady in October. On a year-over-year basis, each region witnessed sales decrease.

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 0.8% from September to a seasonally adjusted annual rate of 6.34 million in October. Sales fell 5.8% from a year ago (6.73 million in October 2020).
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Total housing inventory at the end of October amounted to 1.25 million units, down 0.8% from September and down 12.0% from one year ago (1.42 million). Unsold inventory sits at a 2.4-month supply at the current sales pace, equal to September's supply, and down from 2.5 months in October 2020.
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The sales rate was above the consensus forecast.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in October (6.34 million SAAR) were up 0.8% from last month, and were 5.8% below the October 2020 sales rate.

Some of the increase in sales since the beginning of the pandemic was probably related to record low mortgage rates, strong second home buying, a strong stock market and favorable demographics.

Also, the delay in the 2020 buying season pushed the seasonally adjusted number to very high levels over the winter.   This means there are going to be some difficult year-over-year (YoY) comparisons in the last quarter of 2021.

The second graph shows existing home sales by month for 2020 and 2021.

This was the third month this year with sales down year-over-year. This should continue through the rest of the year, since sales averaged 6.7million SAAR over the last three months of 2020.

The third graph shows existing home sales for each month, Not Seasonally Adjusted (NSA), since 2005.

Sales NSA in September (526,000) were 8.2% below sales in October 2020 (563,000).   Note that sales were down more NSA than SA in October, due to one fewer selling days this year. This decline, NSA, is similar to the decline in the markets I track each month.

Excluding last October (distorted by the delayed selling season), sales NSA were the strongest since 2005!

Housing Inventory is Very Low

The fourth graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased to 1.25 million in October from 1.26 million in September. Inventory usually declines seasonally in October, and then decreases significantly in November and December as potential sellers remove their homes from the market for the holidays. Although inventory is up from the lows last winter, inventory is still very low.

Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The fifth graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory is very low, and was down 12.0% year-over-year (YoY) in September.  Also, as housing economist Tom Lawler has noted, the local MLS data shows even a larger decline in active inventory (the NAR appears to include some pending sales in inventory). Lawler noted:

"As I’ve noted before, the inventory measure in most publicly-released local realtor/MLS reports excludes listings with pending contracts, but that is not the case for many of the reports sent to the NAR (referred to as the “NAR Report!”), Since the middle of last Spring inventory measures excluding pending listings have fallen much more sharply than inventory measures including such listings, and this latter inventory measure understates the decline in the effective inventory of homes for sale over the last several months."

It seems likely that active inventory is down close to 25% year-over-year.

Months-of-supply at 2.4 months is still very low, but above the record low of 1.9 months set in December 2020 and January 2021. 

It is possible inventory will be up year-over-year sometime during the Winter months, but inventory will still be at very low levels.

House Price Growth Deceleration

On prices, the NAR reported:

The median existing-home price for all housing types in October was $353,900, up 13.1% from October 2020 ($313,000), as prices climbed in each region. This marks 116 straight months of year-over-year increases, the longest-running streak on record.

Median prices are distorted by the mix (repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices), but this is the fifth consecutive month with a deceleration in the median price. The NAR reported median prices were up 23.6% YoY in May, 23.4% in June, 17.8% in July, 14.9% in August, 13.3% in September, and 13.1% in October. This deceleration will probably show up in Case-Shiller and the FHFA indexes very soon.

Finally, as usual, housing economist Tom Lawler's forecast was closer to the NAR report than the Consensus. The NAR reported 6.34 million SAAR, Lawler estimated the NAR would report 6.34 million SAAR, and the consensus was 6.20 million SAAR.

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