Sales of previously owned homes increased in October as buyers responded to falling mortgage rates, extending a recovery in the residential real estate market this year that’s providing a modest boost to economic growth.
Contract closings rose to a 5.46 million annual rate, up 1.9% from September, marking the
The housing market has enjoyed tailwinds from steady job creation, historically low interest rates and income growth.
At the same time, the market is being restrained by a lean supply of available properties that is keeping asking prices elevated. The inventory of existing homes available for buyers fell 4.3% from a year ago to 1.77 million units, the lowest October reading on record, according to NAR. It marked the fifth straight year-over-year decline.
The figures follow another report earlier this week that showed beginning construction of single-family homes in October at its strongest pace this year and building permits at their highest since 2007.
"Market conditions for buyers are very favorable" with lower mortgage rates "but the supply remains very short," Lawrence Yun, NAR's chief economist, said at a briefing in Washington. "Buyers are coming back but the lack of inventory is pushing up prices, in my view, way too fast."
"The pickup proves that even with historically low levels of mortgage rates, incremental additional declines do have a positive economic impact (on both sales and refinancings). In fact, sales appeared to be constrained by an acute inventory shortage."
October home purchases rose two of four regions, led by a 4.4% increase in the South, the largest U.S. region.
At the current pace, it would take 3.9 months to sell all the homes on the market, the shortest since March and compared with 4.1 months in September; Realtors see anything below five months of supply as a sign of a tight market.
Forty-six percent of homes sold in October were on the market for less than a month, underscoring still-solid demand trends. First-time buyers made up 31% of sales, down from 33% in the prior month.
Existing-home sales account for about 90% of U.S. housing and are calculated when a contract closes. New-home sales, which make up the remainder, are counted when contracts are signed and will be released Nov. 26.
