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Explaining September’s Existing-Home Sale Surge

Existing-home sales in September "soared," according to a report Thursday from National Association of Realtors (NAR).

An existing home in September sold for a median price of $311,800, a 14.8% gain compared with September of last year. That's one takeaway from the latest National Association of Realtors (NAR) Existing-Home Sales Report for September, which accounts for completed transactions that include single-family homes, townhomes, condominiums, and co-ops. Other data points include the following:

  • More than 7 in 10 homes sold this past September (that is, 71%); those were on the market for less than a month.
  • The homes-for-sale inventory fell 19.2% annually to only 1.47 million homes for sale at the end of September. At the current sales pace, reported NAR, that represents a 2.7-month supply. That's the lowest since 1982 when  NAR started tracking this metric.
  • Each of the four major regions witnessed month-over-month and year-over-year growth, with the Northeast seeing the highest climb in both categories
  • Sales rose 9.4% from August to a seasonally-adjusted annual rate of 6.54 million in September. Overall sales rose year-over-year, up 20.9% from a year ago (5.41 million in September 2019).
  • Foreclosures and short sales represented less than 1% of sales in September, equal to August’s percentage but down from 2% in September 2019.
  • According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 2.89% in September, down from 2.94% in August. The average commitment rate across all of 2019 was 3.94%.

(See the entire report, including a regional breakdown, here.)

“Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season,” said Lawrence Yun, NAR’s Chief Economist. “I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home.”

Homebuilders have ramped up the supply in many areas, Yun said. He also pointed out an increased interest in second or vacation homes. Indeed, NAR reported that sales in vacation destination counties have seen a strong acceleration since July, with a 34% year-over-year gain in September.

“The uncertainty about when the pandemic will end coupled with the ability to work from home appears to have boosted sales in summer resort regions, including Lake Tahoe, mid-Atlantic beaches (Rehoboth Beach, Myrtle Beach), and the Jersey shore areas,” Yun said.

Individual investors or second-home buyers, who account for many cash sales, purchased 12% of homes in September, a small decline from the 14% figure recorded in both August 2020 and September 2019. All-cash sales accounted for 18% of transactions in September, unchanged from August but up from 17% in September 2019, NAR reported.

Realtor.com's Chief Economist Danielle Hale said that buyers' biggest challenges remain "finding a suitable home amid very tight inventory, and qualifying for a mortgage within a framework of tightening credit availability."

She explained that in many large urban areas, rent prices are cooling and are not a factor driving buyers into the market, as it has been in the past.

"Rather, low mortgage rates are enabling buyers to tackle higher home prices and secure a place of their own, with a largely fixed monthly cost," she said.

Realtor.com Senior Economist, George Ratiu, says the decline in mortgage applications for a fourth consecutive week, even as interest rates continue to fall, reflects "growing tension."
He explained that “interest rates slid again this week because still-elevated unemployment claims point to a slow economic recovery and hopes for a fiscal stimulus package in Congress remain cloudy. Investors moved toward the relative safety of mortgage bonds, pushing rates lower, and leading to a slight 1 basis point decline in the 30-year fixed mortgage rate, to 2.80%, the eleventh time in 2020 that the rate broke a record low."

Austin Niemiec, EVP of Rocket Pro TPO, offered a broker perspective on the "massive" rise in home sales.

"Mortgage brokers finished off a red-hot summer with home sales reaching historic levels and the refinance market remaining strong on the back of record-low interest rates. As we prepare for the fall and winter, maintaining partner relationships with real estate agents and financial advisors will be critical in assisting more purchase clients through the end of the year."

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media and Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning News, among others. Contact Christina at christina.hughesbabb@thefivestar.com.

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