Was it a case of pre-election jitters about the housing market’s direction and interest rates poised to move higher? That could have been a factor behind the release of pent-up demand that pushed up sales of existing homes in October to a near 10-year-high annualized rate.
Sales of existing-home sales in October shot up for the second straight month to become the highest annualized pace in nearly a decade, according to the National Association of Realtors. All major regions saw monthly and annual sales increases in October.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 2.0 percent to a seasonally adjusted annual rate of 5.60 million in October, from an upwardly revised 5.49 million in September.
October’s sales pace is 5.9 percent above a year ago (5.29 million) and surpasses June’s pace (5.57 million) as the highest since February 2007 (5.79 million).
The median existing-home price for all housing types in October was $232,200, up 6.0 percent from October 2015 ($219,100). October’s price increase marks the 56th consecutive month of year-over-year gains.
Lawrence Yun, NAR chief economist, says the October surge 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.”
Since the election of Donal Trump as president, average mortgage rates have soared about half a percentage point to about 4 percent for the 30-year fixed loan. That’s a far cray from the average rates that drove the October surge: a 30-year, conventional, fixed-rate mortgage in October rose just slight to 3.47 percent from 3.46 percent in September.
“The ramp-up in housing starts in October is a hopeful sign that overall supply can steadily increase enough to provide more choices for buyers and also moderate price growth,” said Yun. “A prolonged continuation of the robust single-family starts pace seen last month (869,000) would go a long way in giving homeowners much-needed assurance that they can list their home for sale and find a new home to buy within a reasonable timeframe.”
“To alleviate the cost for borrowers and better reflect the current risk in the marketplace, Realtors® encourage FHA to reduce mortgage insurance premiums and consider eliminating ‘life of loan’ mortgage insurance,” he said. “These two moves would help the current homeownership rate recover from its near all-time low and give more prospective first-time buyers a more affordable financing option.”
On the subject of first-time buyers, NAR President William E. Brown, a Realtor from Alamo, California, said that the Federal Housing Administration (FHA) should reduce mortgage insurance premiums and “consider eliminating ‘life of loan’ mortgage insurance.”
“These two moves would help the current homeownership rate recover from its near all-time low and give more prospective first-time buyers a more affordable financing option,” Brown said.