Existing Home Sales (Finally) Show Staying Power

Existing home sales, buoyed by first-time homebuyers, rebounded strongly in September, the National Association of Realtors reported yesterday.

NAR said first-time buyers grew to 34 percent of buyers in September, a level not seen in more than four years. All four regions saw increases in closings last month, while distressed sales fell to a new low of just 4 percent of the market.

The report said total existing home sales rose by 3.2 percent to a seasonally adjusted annual rate of 5.47 million in September, from a downwardly revised 5.30 million in August. Sales reached their highest pace since June (5.57 million) and improved by 0.6 percent from a year ago (5.44 million).

Single-family home sales increased by 4.1 percent to a seasonally adjusted annual rate of 4.86 million in September from 4.67 million in August, and improved by 0.6 percent from the 4.83 million pace a year ago. The median existing single-family home price rose to $235,700 in September, up 5.6 percent from a year ago.

Existing condominium and co-op sales declined by 3.2 percent to 610,000 units in September from 630,000 in August, unchanged from a year ago. The median existing condo price rose to $222,100 in September, 6.1 percent above a year ago.

Regional performances were strong, NAR said. Sales in the Northeast jumped by 5.7 percent to an annual rate of 740,000, unchanged from a year ago. The median price in the Northeast rose to $261,600, up 2.1 percent from a year ago. In the Midwest, sales rose by 3.9 percent to 1.32 million and improved by 2.3 percent from a year ago. The median price in the Midwest rose to $184,500, up 5.9 percent from a year ago.

Sales in the South ticked up 0.9 percent to 2.16 million, but fell by 0.9 percent from a year ago. The median price in the South rose to $204,000, up 6.6 percent from a year ago. Sales in the West jumped by 5.0 percent to 1.25 million and came in 1.6 percent higher than a year ago. The median price in the West rose to $345,400, up 8.1 percent from a year ago.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said the September report beat all expectations. “Healthy buyer traffic, solid job growth, home price appreciation and low interest rates continue to point to steady home sales improvement in the coming year,” he said. “Inventory on the market remains low, thereby constraining sales.”

NAR Chief Economist Lawrence Yun said the two-month slump in existing sales reversed course convincingly in September. “The home search over the past several months for a lot of prospective buyers, and especially for first-time buyers, took longer than usual because of the competition for the minimal amount of homes for sale,” he said. “Most families and move-up buyers look to close before the new school year starts. Their diminishing presence from the market towards the end of summer created more opportunities for aspiring first-time homeowners to buy last month.”

NAR reported the median existing home price for all housing types in September rose to $234,200, up 5.6 percent from a year ago ($221,700). September’s price increase marked the 55th consecutive month of year-over-year gains. Total housing inventory at the end of September rose by 1.5 percent to 2.04 million homes available for sale, but was 6.8 percent lower than a year ago (2.19 million) and has now fallen year-over-year for 16 straight months. Unsold inventory is at a 4.5-month supply at the current sales pace, down from 4.6 months in August.

“Inventory has been extremely tight all year and is unlikely to improve now that the seasonal decline in listings is about to kick in,” Yun said. “Unfortunately, there won’t be much relief from new home construction, which continues to be grossly inadequate in relation to demand.”

First-time buyers represented 34 percent of sales in September, up from 31 percent in August and 29 percent a year ago. First-time buyers represented 30 percent of sales in all of 2015.

Distressed sales fell to a new low of 4 percent in September, down from 5 percent in August and 7 percent a year ago. Three percent of September sales involved foreclosures; 1 percent were short sales. Foreclosures sold for an average discount of 15 percent below market value in September (12 percent in August), while short sales were discounted 11 percent (14 percent in August).

The report said properties typically stayed on the market for 39 days in September, up from 36 days in August but down considerably from a year ago (49 days). Short sales were on the market the longest at a median of 118 days in September, while foreclosures sold in 67 days and non-distressed homes took 38 days. Forty-four percent of homes sold in September were on the market for less than a month.

All-cash sales represented 21 percent of transactions in September, down from 22 percent in August and 24 percent a year ago. Individual investors purchased 14 percent of homes in September, up from 13 percent both in August and a year ago. Sixty-five percent of investors paid in cash in September.