Purchases of previously owned homes surged to the highest annual rate since the housing crash as buyers either discounted rising mortgage rates and prices and declining inventory or were inspired by the same, fearing worse ahead.
Existing home sales jumped 2.0 percent in October to a 5.60 million annual rate from 5.49 million the month before, according to the National Association of Realtors (NAR) on Tuesday. It was the second steep increase in a row and the fastest selling pace since February 2007, when the housing market was in the middle of the three year collapse of its bubble. Analysts in the Bloomberg survey had expected 5.44 million units.
Existing home sales account for about 90 percent of housing market activity in the U.S. Sales are recorded at closing, indicating that for October the majority of the contracts were signed from late July to early September, given the standard two month wait from contract to closing. For most purchasers those two months are used to obtain mortgage financing.
After hitting a bottom in July 2010 at 3.45 million in annual sales, purchases of previously occupied homes rose steadily for three years reaching 5.26 million units in August 2013. Sales then fell for six months dropping back to 4.72 million in February 2014. That half year fall coincided with 30-year mortgage rates jumping from 3.43 percent in April 2013 to 4.54 percent that December. Rates then slowly ropped back to 3.32 percent by September 2016.
For the subsequent two and a half years from February 2014, annual purchase rose steadily if fitfully, with major declines at the end of 2014, in November 2015, and February 2016. In June of this year sales reached 5.57 million annually, only to falter again to 5.30 million in August.
After reaching the above low in September, mortgage rates had moved back to 3.57 percent by late October and early November. Rates have jumped sharply since ether election of Donald trump flying up from 3.57 percent on November 7th to 3.95 percent by the 21st.
The two month surge in existing home sales from August cannot blamed on buyers trying to get ahead of rising mortgage rates. When the contracts that resulted in the October sales jump were signed back in July, August and September rates were still at the bottom of their historic range. The first substantial move higher did not begin until September 7th from 3.35 percent to September 22nd at 3.63 percent.
At the same time home prices have been rising faster than wages. The median price of an existing home sold in October was $232,200, 6.0% higher on the year. Average hourly earnings were 2.7 percent higher on the year in October.
First-time home buyers, a standard measure of the health of the housing market, composed 33% of October sales, according to NAR, 40 percent is considered a sign of a normal market. That is, down from 34% in September, a figure that matched the highest level since July. Forty percent is con12. Distressed sales ticked up one percentage point to account for 5 percent of all sales.
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