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Sales of previously owned homes edged up 0.8 percent in October to an annual rate of 6.34 million units, the National Association of Realtors (NAR) reported, 5.8 percent below October 2020, which was the market’s cyclical high point last year.
If full-year sales top six million, it would be the largest number of existing homes sold since 2006, according to the NAR.
Realtors are now predicting full-year sales of over 6 million, which would be the highest number of sales since 2006.
However, fewer of those homes are being bought by individuals or families.
Investors made up 17% of October buyers, compared to 13 percent in September and 14 percent in October 2020, the NAR noted.
All-cash buyers made up 24 percent of October’s buyers, a trademark of investors, CNBC noted.
First-time buyers accounted for 29 percent of last month’s sales, 3 percentage points fewer than a year earlier.
Prior to the COVID War, 40 percent of buyers were first-timers, NAR said.
On 1 November, there were 1.25 million existing homes for sale, 12 percent fewer than on the same date last year.
The number represents a 2.4-month supply at the current rate of sales. A supply of five to six months is considered a market in which buyers and sellers have equal advantage, NAR said.
The tight market pushed the median price of an existing home to $353,900, 13.1 percent above October 2020’s median.
Sales of homes priced under $250,000 dropped 24 percent, year over year, while sales of homes valued from $750,000 and $1 million climbed 25 percent. Sales of million-dollar-plus homes shot up 31 percent.
Mortgage interest rates rose steadily through August and September in October, with the average 30-year fixed-rate mortgage costing 3.22 percent on 29 October, according to Mortgage News Daily.
TRENDPOST: October’s numbers confirm two trends we have highlighted previously.
First, sales of starter homes priced under $250,000 plunged, while homes only the upper middle class and richer can afford boomed. For more than a year, first-time buyers and modest-income households have been progressively closed out of the housing market, as we have documented in articles such as “Median U.S. Home Price Sets Another Record” (29 Jun 2021) and “Home Prices Up, Incomes Down” (16 Nov 2021).
Second, private equity firms and institutional investors have been grabbing up single-family homes and charging premium rents to families wanting to escape cities but shut out of the housing market by rising prices, cash-rich buyers and tougher standards set by mortgage lenders, a growing trend we flagged in “Invitation Homes to Buy $1 Billion Worth of Houses This Year” (1 Jun 2021) and “Blackstone Extend Reach Into Housing Market” (29 Jun 2021).
Together, these trends underscore our forecast that steadily fewer potential home buyers will be granted the chance to create wealth in the way that previous generations have relied on—home ownership—as we noted in past articles such as “Private Equity Partners Target $5 Billion in Rental Houses” (27 Jul 2021).
Instead, high rents will deny these would-be buyers the ability to save enough cash to make a down payment on a home, relegating them to a lifetime of renting, living in someone else’s house. And, considering that the Bigs keep getting bigger, they will continue to gobble up housing market sectors for many years to come.
TREND FORECAST: Unlike the Panic of ’08 economy that was brought down in part by the artificially propped up subprime mortgage crisis, this time, those who can afford homes have been buying them. Thus, we maintain our trend forecast that the housing market will decline as interest rates go up. However, it will be a correction, and not a crash.