Existing home sales shot up in October to the highest annualized pace in almost a decade, according to the new report from the National Association of Realtors.
“The existing home sales market continues to show surprising strength, defying expectations for a modest fall and instead delivering the strongest month in almost a decade,” Zillow Chief Economist Svenja Gudell said. “Clearly, the market continues to underestimate just how much demand for homes is out there, even in the face of tight inventory and rising existing home prices that are now the highest on record.”
Existing home sales, completed transactions including single-family homes, townhomes, condominiums and co-ops, increased 2% to a seasonally adjusted annual rate of 5.6 million. This is up from 5.49 million in September, and up 5.9% from last year’s 5.29 million. October passed up June’s peak to hit the highest pace 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 said. “Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes.”
“The good news is that the tightening labor market is beginning to push up wages and the economy has lately shown signs of greater expansion,” Yun said. “These two factors and low mortgage rates have kept buyer interest at an elevated level so far this fall.”
Home prices are still rising, increasing 6% annually in October to $232,200, up from $219,100 last year. This marks the 56th consecutive month of annual gains.
Housing inventory declined 0.5% from last month to 2.02 million existing homes available for sales. This is 4.3% below last year’s 2.11 million, and the 17th consecutive annual decrease. Inventory now rests at a 4.3 month supply.
One expert said that President-elect Donald Trump could focus on policies to reverse this lack of housing inventory.
“President-elect Trump could help boost inventory by implementing policies that would encourage investors to sell homes they bought during the foreclosure crisis, many of which are suitable for starter homebuyers,” Trulia Chief Economist Ralph McLaughlin said. “Such policies could include a reduction in capital gains taxes for homes sold by investors to owner-occupiers, an increase in tax rates on rental income, or both.”