The Mortgage Corner
Total existing-home sales, https://www.nar.realtor/existing-home-sales, including single-family homes, townhomes, condominiums and co-ops, rose 9.4 percent from August to a seasonally-adjusted annual rate of 6.54 million in September.
The housing boom continues in the middle of the coronavirus pandemic. Overall home sales are up 20.9 percent from a year ago (5.41 million in September 2019).
"Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season," said Lawrence Yun, NAR's chief economist. "I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home."
That is one of the reasons for the surge—more well-healed, white collar buyers are working from home as the pandemic has accelerated the digital revolution, and a central work location is no longer needed.
Couple this with the upcoming 5G networks that will power more of everything—manufacturing, services, and online education, for starters. The World Economic Forum described what is possible with the wider band widths and faster speeds that 5G will bring to economic growth.
“Think about a world in which not just people but all things are connected: cars to the roads they are on; doctors to the personal medical devices of their patients; augmented reality available to help people shop and learn and explore wherever they are. This requires a massive increase in the level of connectivity.”
And it is exacerbating the existing housing shortage. Builders are playing catch up to this speeding up of the surge in demand.
Total housing inventory at the end of September totaled just 1.47 million units, down 1.3 percent from August and down 19.2 percent from one year ago (1.82 million). Unsold inventory sits at a 2.7-month supply at the current sales pace, down from 3.0 months in August and down from the more normal 4.0-month figure recorded in September 2019.
Builders are responding. U.S. single-family homebuilding raced to a more than 13-year high in September. The report from the Commerce Department showed single-family homebuilding jumped 8.5 percent to a seasonally adjusted annual rate of 1.108 million units last month. That offset a 16.3 percent decline in starts for the volatile multi-family segment to a pace of 307,000 units, said the National Association of Homebuilders (NAHB). Overall, housing starts increased 1.9 percent to a rate of 1.415 million units last month.
Homebuilding has advanced 11.1 percent year-on-year, with single-family starts surging 22.3 percent. Further gains in single-family home construction are likely, said Reuters, with building permits shooting up 7.8 percent to a rate of 1.119 million units last month, the highest level since March 2007.
"Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market," said Lawrence Yun, NAR’s chief economist. "Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery."
Scarce inventory has been problematic for the past few years, according to Yun, an issue he says has worsened in the past month due to the dramatic surge in lumber prices and the dearth of lumber resulting from California wildfires.
Mortgage rates are helping to offset some of those high home prices, however. A 30-year conforming fixed-rate mortgage dropped to 3 percent in August and has averaged below 3 percent in the past few weeks, the lowest on record.
I said last week that the NAR also reports pending home sales for contracts closing in approximately two months are also surging, which will boost sales through the end of the year. Pending home sales in August continued to move upward, marking four uninterrupted months of positive contract activity. Each of the four major regions have experienced growth in month-over-month and year-over-year pending home sales transactions.
Harlan Green © 2020
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