October 25, 2020
Existing home sales surge in September, major metropolitan areas see huge double digit home price gains in Q3 and single-family housing starts reach highest level since 2007. We take a closer look This Week in Real Estate.
* Existing Home Sales Surge 9.4% in September. Sales of existing homes took off in September, jumping 9.4% from August a seasonally adjusted annual rate of 6.54 million, the National Association of Realtors said in a report on Thursday. Compared to a year ago, sales are up 20.9%. “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.” An improving job market, low rates, and families looking for more space played key roles in the recent activity spike, according to Mortgage Bankers Association senior vice president and chief economist, Mike Fratantoni. “The primary constraint to even more sales is the plummeting inventory of homes on the market, which is leading to bidding wars and spikes in home prices across the country. Fortunately, we are seeing a pick up in the pace of construction, which should bring more inventory onto the market for next year’s buyers,” Fratantoni said.
* 77 Percent of Metros Post Double-Digit Annual Home Price Gains in Q3 2020. The typical third-quarter 2020 home sale in the United States generated a gain of $85,000, up from $75,000 in the second quarter of 2020 and $66,000 in the third quarter of last year. The typical $85,000 home-sale profit represented a 38.6 percent return on investment compared to the original purchase price, up from 37.5 percent in the second quarter of 2020 and up from 33.7 percent a year ago. Both the raw-profit and return-on-investment figures stood at the highest points since the U.S. economy began recovering from the Great Recession in 2012. The biggest annual increases in profit margins came in the metro areas of St. Louis, MO (margin up from 22.4 percent to 37.1 percent); Columbus, OH (up from 37.1 percent to 51.6 percent); Salem, OR (up from 60.6 percent to 73.9 percent); Indianapolis, IN (up from 32.7 percent to 46 percent) and Akron, OH (up from 20.7 percent to 33.7 percent). The West continues to have the largest profit margins in the country, with 14 of the top 15 typical home-sale returns on investment in the third quarter, from among the 103 metropolitan statistical areas with enough data to analyze. They were led by San Jose, CA (89 percent return); Salem, OR (73.9 percent); Seattle, WA (73 percent); Spokane, WA (70.3 percent) and Salt Lake City, UT (65.1 percent).
* September Single-Family Housing Starts Reached Highest Level Since 2007. Single-family housing starts soared in September, a new report from the U.S. Census Bureau shows. Privately owned housing starts in September rose to an annual rate of 1.415 million, 1.9% above the revised August estimate of 1.388 million and 11.1% above the September 2019 rate of 1.274 million, the Bureau said. Single-family housing starts in September were at an annual rate of 1.108 million, which is 8.5% above the revised August figure of 1.021 million, and a level not seen since 2007, Doug Duncan, chief economist at Fannie Mae, said. Mortgage Bankers Association Senior Vice President and Chief Economist Mike Fratantoni noted that single-family permits jumped 24.3% from a year ago.