Housing Values are Rising!

Existing-Home Sales Are Rising Rapidly!

There is some serious growth happening in the real estate market despite the COVID-19 pandemic. 

We haven’t seen this type of growth since 2006! According to the recent data released for U.S. existing-home sales in October: existing-home sales rose for the fifth consecutive month to an annual rate of 6.85 million units. That is approximately 4.3% higher than September’s statistics and 26.6% higher than last year’s sales.

Since the market regained its traction in July, there has been a heavy boost in existing-home sales performance. As you may know, there is a strong correlation between home sales and home prices. They rise together. The average price in October was measured at $313,000. That’s up by a massive 15.5% from just a year ago.

Source: Windermere Economics

Why are we seeing such significant increases?

Could it be that mortgage rates are lower than ever? Well, that certainly isn’t hurting. But actually, the more considerable reason is the disproportionate supply and demand rate. There is far more demand than there is supply. It’s economics 101 — prices rise when there are limited supply and overwhelming demand.

In October of 2020, there were fewer than 1.4 million homes for sale in the U.S. With tight supply and new net demand, there are only 2.7 months of inventory at the current sales pace, which places it at an all-time low.

The bottom line is, the market is quite unbalanced. Depending on where you are in the country, a balanced market will show a 4-6 month rate. The current sales pace is cause for a very competitive market. There was an average of 3.5 offers for every deal written in October. Additionally, 70% of homes sold within just four weeks of being on the market. To put that into perspective for you, the time sold was an average of 36 days last year. Houses are flying off the market!

Source: Windermere Economics

What regions are seeing the most growth?

All areas of the U.S. saw sales rise by at least 20%, but the Northeast region rose the fastest by far. Over 12 months, the Northeast increased to an impressive 30.4%. The South saw a 26.5% increase. The Midwest’s sales expanded by 28.1%. And finally, the West grew by 22%. 

As sales rose in these regions, as did the prices, expectedly. The South, The Midwest, and The West saw an average of a 15-16% price increase over 12 months. The Northeast’s 12-month price increase totaled a whopping 20.2% Fun fact: while the Northeast saw the most significant price increase for single-family homes, Condo prices rose the most in the Southern states.

Time to wrap up…

Well, there you have it! These sales and price increases are quite impressive, and there are no signs of them slowing down. It’s an intense time for the real estate industry. Something to keep your eye on is the multifamily market inventory. If these inventory levels continue to rise, we may see price growth starting to slow for the condos and single-family homes.

And although there are very advantageous mortgage rates, this upward trajectory may not be sustainable. I’m not saying that the prices will retreat, but the pace of growth will slow, even with very significant demand. I say this because we will eventually hit an affordability cap, or we will see additional supply that will affect pricing.

But altogether the housing market is still performing well, regardless of COVID-19. I predict this streak will continue in the final stretch of 2020, even if we see some states slowing their economies due to coronavirus cases spiking. It sure is an exciting time in the real estate market!