Existing Home Sales are Surging

Sales of existing homes jumped 9.4% as we moved from August to September, and we are now at an adjusted annual sale rate of 6.54 million for this category.

Compared to this time last year, the sales of existing homes are up 20.9%. This jump in sales is primarily attributable to historically low interest rates as well as the high number of buyers in the market. Due to the COVID-19 pandemic (and its ensuing response), we have seen large upticks in buyer interest within previously niche markets (including vacation homes), as many buyers now have the flexibility to work from home.

This surge in buyers, however, has been met with historically low inventory. At September's end, housing inventory totaled only 1.47 million units. This was a decrease of 1.3% from August and a drop of 19.2% from this time last year.

Unsold inventory is often measures as a "months supply." This essentially gauges how long it would take to sell all the homes that are currently on the market assuming that no other homes come onto the market moving forward. NAR stated that this figure was 2.7 months in the month of September. That's down from 3 months in August and 4 months from this time last year.

The only reason that we are not seeing even more sales is due to the fact that the inventory of homes on the market is plummeting. The phenomenon is causing a prevalence of bidding wars and spikes in home prices across the United States. Just how much are existing home prices spiking? Well, the medium existing home price last month was $311,800. That figure is up 14.8% from this time last year. And the spike isn't region-specific; we have seen spikes in home prices across every region in the country. In spite of this, 71% of homes sold in September were on that market for less than a month (an average of 21 days). This is an all time low.

On a good note, we are experiencing a boom in the construction of new homes, which will bring a great deal of inventory to the market for 2021 buyers.

However, we must still be mindful of risk. So long as unemployment remains elevated, there exists the possibility that we see layoffs spilling into higher-paying sectors that are currently propping up the housing market. A broad recovery is largely dependent upon a vaccine that can end this pandemic as well as a strong fiscal stimulus that will enable families to maintain their incomes through this economic downturn.