New home sales, which are recorded at the contract signing, came in at a seasonally adjusted, annualized rate of 999,000 in October, just shy of the one million hit in August and September but almost 42% above year-ago levels. The South and Midwest posted declines but that can be attributed to seasonal adjustments, which are off during the pandemic. Sellers have been slower to return to the market than buyers, so builders are struggling to fill the shrinking supply of housing; current inventory sits at 3.3 months’ supply, half of what is usually needed to clear the market.
Existing home sales, which are recorded when the contract is closed, rose for the fifth month in a row in October to a seasonally adjusted, annualized rate of 6.85 million. Sales are up almost 27% compared to a year ago; 72% of homes on sale in October were on the market for less than a month. The pressure on the supply of housing has caused prices to shoot higher this year; the median price rose almost $43,000 above the level before the pandemic began. Supply of existing homes sits at a new historic low, only 2.5 months’ worth.
During the week of Thanksgiving, mortgage rates hit another low; applications to purchase a home and to refinance rose 4% and 5% respectively, compared to last week. Mortgage applications for purchase are almost 20% higher than one year ago; applications for refinance are almost 80% higher than a year ago. Analysis by a mortgage data provider
showed that more homeowners, over 19 million, could save money by refinancing but haven’t tried yet.
According to the New York Federal Reserve Bank, the median credit score for mortgage borrowers has risen to the highest level since the data series started 20 years ago. Those who are refinancing tend to have higher credit scores than new home buyers, but mortgage lenders increased their standards for all borrowers when the pandemic took hold.
The economy is stalling everywhere but in the housing market. The housing market will continue to grow as long as those who have been spared from significant wage or job loss can participate. The longer Congress waits to pass more aid, the more uneven the recovery will be once vaccines are widely distributed.
Copyright © 2020 Diane Swonk – All rights reserved. The information provided herein is believed to be obtained from sources deemed to be accurate, timely and reliable. However, no assurance is given in that respect. The reader should not rely on this information in making economic, financial, investment or any other decisions. This communication does not constitute an offer or solicitation, or solicitation of any offer to buy or sell any security, investment or other product. Likewise, this communication serves to provide certain opinions on current market conditions, economic policy or trends and is not a recommendation to engage in, or refrain from engaging, in a particular course of action.