Homebuying activity continues to rise, with October showing the second straight month of gains to reach a cyclical high, even in the face of rising prices and shrinking inventory.
“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,” explains National Association of Realtors (NAR) chief economist Lawrence Yun. “Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes.”
Yun also goes on to say that the increase from last month was assisted by lower mortgage rates and a more stable job market. All together, of course, this could be sign of an upswing.
He adds, “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. These two factors and low mortgage rates have kept buyer interest at an elevated level so far this fall.”
Now, existing-home sales account for most of all US homebuying activity. In June, the numbers peaked at an annual rate of 5.57 million, but then began to soften over most of the third quarter. Thankfully, though, the numbers picked up again over the past two months with September sales paced at a revision of 5.49 million.
Accordingly, Amherst Pierpont Securities chief economist Stephen Stanley comments, “Going forward, we will apparently have a tug of war with regard to affordability between rising employment and wages on one side and rising home prices and mortgage rates on the other.”
In addition, PNC Financial Services Group deputy chief economist Gus Faucher explains there is a lot of “pent-up demand” in the market right now. In a note to clients he shares, “Fundamentals for the housing market are good, with job and income gains and low mortgage rates supporting demand. Tight supplies could be a near-term constraint, however.”
Currently, the sales pace has a 4.3 month duration before exhausting the present supply of previously owned homes. That is down from 4.8 months from the same period last year. Furthermore, NAR says that housing inventory has fallen 17 straight months, year-over-year.