What is happening in the residential real estate market is remarkable.
By Peter Boockvar, author of the Boock Report
November 21 (King World News) – Existing home sales in October totaled 5.48mm, above the estimate of 5.40mm while September was revised slightly lower to 5.37mm from 5.39mm. These levels compare with the year to date average of 5.52mm. Inventory and pricing continues to be an issue…
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The number of homes for sale (see chart below) fell to the lowest since March and this sent months’ supply down to just 3.9, also the lowest since March. This helped to send prices up another 5.5% y/o/y to $247,000 though that was down a touch sequentially.
After falling to just 29% in September, first time buyers made up 32% of purchases which just puts it back to trend. It totaled 33% one year ago.
After the slowdown in the South after the storms, sales rebounded in October in this region but they are still below where they were in July. Sales also rose m/o/m in the other 3 key regions.
As for the storms, the NAR said:
“The residual effects on sales from Hurricanes Harvey and Irma are still seen in parts of Texas and Florida. However, sales should completely bounce back to their pre storm levels by the end of the year, as demand for buying in these areas was very strong before the storms.”
On the industry, the NAR said:
“While the housing market gained a little more momentum last month, sales are still below year ago levels because low inventory is limiting choices for prospective buyers and keeping price growth elevated.”
This latter point is a key factor on why first time buyers are still a historically smaller share of buyers and why many are still renting. For perspective, single family home price gains over the past 25 years has averaged 3.6% per annum which of course includes the boom and bust.
A Remarkable Situation
Bottom line, we need more lower priced new homes to fill in these inventory issues. The lack of inventory and high prices is feeding on itself. The seller doesn’t want to sell because of the slim pickings to buy and if they want to sell, the pool of buyers is small because first time buyers are challenged by price and a lack of savings for a down payment (even with 5% down). Not adjusting for population growth, existing home sales are no higher than they were in 2001 in the depths of that recession.
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