Economic Update November 1, 2021
We missed last week, but we are back this week to give you the information you need to stay informed on the economic events around you.
The housing market is finally cooling off, but don’t expect a dip.
People are back on the market, but luckily there is more supply, too.
In September, Existing-Home Sales Rise
The September increase in existing home sales was 7.0% to 6.290 million annually. However, sales are still down 2.3% compared to a year ago. The sales of homes still in use have experienced a dramatic decline since the pandemic struck the US in 2020. However, it looks like the upward trend in home sales is returning, despite buyers’ continued struggles with rising prices and a lack of supply. In September, there were 1.27 million homes that were listed but not sold. This is the lowest September number since 1999.
As virus fears diminish, I expect listings to rise again. The months’ supply of homes for sale (how much time it would take to sell current inventory at the current pace) dropped to 2.4 months in September. This is still a low number. Despite the shortage of listings, there is still significant buyer demand. In September, 86% of homes on the market were sold for less than one month.
Strong demand and limited supply have pushed median prices up by 13.3% over the past year. However, price gains had slowed down since May, when they reached a 23.6% year-to-year increase. The 2021 sales are expected to surpass 2006’s record. Prices will continue to rise as more inventory becomes available, and prices will continue to decline. In September, the median home price in the United States fell to $352,800. However, it is still up 13.3% from a year ago.
Home-Price Growth is Slowing Down
However, this doesn’t mean that prices are dropping. Rising mortgage rates have hampered buyers’ ability to drive up home prices. According to the latest S&P CoreLogic Case-Shiller Home Price Index, August’s home prices rose 19.8% compared to August last year. This is roughly the same as the increase in August the previous month.
The “20-City Index”, which measures price appreciation in several major metropolitan areas throughout the country, saw a 19.7% increase year-over-year. Phoenix (33.3%) and San Diego (26.2%) were the top cities that saw the most significant annual gains. With a 25.9% rise, Tampa beat out Seattle and Dallas as the third-largest gain in home prices nationally. The index tracks 20 major cities, and all saw an increase in home prices in August. However, in most cases, it was slower than July.
The Federal Housing Finance Agency also reported that prices rose 18.5% between August 2020-2021. In addition, FHFA reported that New England home prices fell by a small amount between July and August. However, they increased by almost 2% in the South Atlantic region (Delaware, Maryland, Virginia, and West Virginia) over that period. This includes Delaware, Maryland, and Virginia. The pace of month-over-month gains in house prices has slowed, but annual increases in home prices remained high in August.
However, this does not mean that house prices will drop. They are continuing to rise at a double-digit rate in all regions. Nevertheless, it does indicate that we may have reached the peak of annual gains. The future conditions for buyers will depend primarily on two factors: mortgage rates and the supply of housing.