Existing-home sales highest in nearly a decade
Existing-home sales grew in October, reaching the highest annualized pace in nearly a decade, according to the National Association of Realtors® (NAR).
NAR reports that all major regions in the U.S. had monthly and annual sales increases in October. Total existing-home sales increased 2 percent from September to the seasonally adjusted annual rate of 5.6 million units, the highest since February 2007.
“October’s strong sales gain was widespread throughout the country and can be attributed to the release of the unrealized pent-up demand that held back many would-be buyers over the summer because of tight supply,” NAR chief economist Lawrence Yun says, according to a statement.
“Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes,” he adds.
Unsold housing inventory was at a 4.3-month supply in October, down from 4.4 months in September, according to NAR. A “normal” supply of unsold inventory is six months.
So far this year, there’s been a rebound in two key groups of homebuyers: first-time buyers and single women, according to NAR.
Single female buyers comprised 17 percent of total purchases this year, the highest since 2011, according to NAR.
“Despite having a much lower income [$55,300] than single male buyers [$69,600], female buyers made up over double the amount of men [7 percent],” Yun says.
“Single women for years have indicated a strong desire to own a home of their own, as well as an inclination to live closer to friends and family. With job growth holding steady and credit conditions becoming somewhat less stringent than in past years, the willingness and opportunity to buy is becoming more feasible for many single women.”
First-time buyers comprised 33 percent of sales in October, down from 34 percent in September, yet up from 31 percent from a year ago, says NAR. In September, the share of first-time buyers for existing-sales was the highest in over four years.
According to NAR, the annual share of first-time buyers in 2016 was 35 percent, the highest since 2013.
What will next year hold for the industry?
“As a result of the anticipated economic stimulus in early 2017, mortgage rates post-election have now surged to around 4 percent as investors expect a strengthening economy and higher inflation,” Yun says.
“In the short-term, some prospective buyers may rush to lock in their rate and buy now, while others — especially those in higher-priced markets — may be forced to delay as a larger monthly payment outstretches their budget,” he adds.
According to NAR, for the third year in a row the typical down payment size was 6 percent for first-time buyers. For repeat buyers, it was 14 percent. And 59 percent of buyers so far this year financed their home with a conventional mortgage. Meanwhile, 33 percent of first-time buyers took out a low-down payment Federal Housing Administration-backed mortgage, which is down from 54 percent in 2011.
Among primary sources of down payments for buyers, personal savings ranked first for first-time and repeat buyers. In second for first-time buyers was a gift from a friend or relative (24 percent, down from 27 percent last year). For repeat buyers, in second was the sale proceeds from their previous residence, according to NAR.