US home sales unexpectedly hit nine-month high

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US home sales rose unexpectedly in October, hitting their highest level in nine months, although higher prices amid tight supplies continued to deter first-time buyers from the market.

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Monday’s report from the National Association of Realtors also saw a rise in the share of home-buying investors last month, possibly reflecting rising demand for rental housing as the economy returns to normal, thanks to vaccination against COVID-19.

Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia, said, “While competition for homes has eased somewhat since the frenzy months earlier this year, competition is still fierce and prices still remain low.” growing at double digit rate. “The problem is particularly acute for low-income buyers as prices and home availability are still skewed towards higher priced homes.”

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Current home sales rose 0.8 percent to a seasonally adjusted annual rate of 6.34 million units last month, the highest level since January. Economists polled by Reuters had forecast a decline in sales to 6.20 million units.

The paucity of timber and other building materials has hindered the construction of new homes.
Bloomberg via Getty Images

Sales rose in the most affordable Midwest region and densely populated South, but fell in the Northeast and remained unchanged in the West, which is the most expensive region.

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Home resales, which make up the bulk of US home sales, dropped 5.8 percent on a year-over-year basis.

First-time buyers accounted for 29 percent of sales last month, down from 28 percent in September and 32 percent a year ago. Individual investors or second home buyers made up 17 percent of the transactions. Which was 13 percent in September and 14 percent a year ago.

Sales soared last summer amid migrations from cities to the suburbs and other low-density locations as Americans sought more spacious housing for home offices and online schooling during the pandemic.

A real estate agent places a sold sign on a Spanish-style home
First-time buyers were responsible for 29 percent of home sales in October.
Getty Images

With vaccinations allowing workers to re-open for in-person learning in offices and schools, the pandemic tailwind has eased. Sales declined from a peak of 6.73 million unit-paces in October 2020, but housing demand remains strong and continues to outpace supply.

The average current home price rose 13.1 percent from a year earlier to $353,900 in October.

There were 1.25 million pre-owned homes on the market in October, down 12 percent from a year ago. Last month, properties were generally in the market for 18 days. This is compared to 17 days in September and 21 days a year ago.

yellow house sign
The current housing market presents particularly difficult challenges for low-income potential buyers.
Getty Images/iStockPhoto

Eighty-seven percent of homes sold in October were on the market for less than a month.

Last week’s government data showed a sharp drop in single-family home construction in October and the biggest backlog of homes in 15 years due to material and labor shortages. This could lead to a boost in housing inventory when the supply shortfall is short.

At October sales pace, it would take 2.4 months to clear existing inventory, down from 2.5 months a year ago. Six to seven months’ supply is seen as a healthy balance between supply and demand.

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