Existing Home Sales Jumped To 14-Year High In August, But Inventory Remains Tight

Sales of existing homes jumped by 2.4% from July to August to a seasonally adjusted annual rate of 6 million – the highest level since December 2006.

On a year-over-year basis, sales climbed by 10.5% from 5.43 million in August 2019, the National Association of Realtors (NAR) said Tuesday.

August 2020 also marked the third straight month of positive sales gains.

"The past few months have shown how valuable real estate is in the country, both to our nation’s economy and to individuals who have been given an opportunity to rethink their location and redesign their lifestyle," NAR President Vince Malta said.

While all four major geographical regions showed gains for the month, the Northeast outperformed the other areas. Existing home sales in the Northeast jumped by 13.8% in August to an annual rate of 740,000.

Home prices are also climbing.

The median existing home price for all housing types rose by 11.4% from $278,800 in August 2019 to $310,600 in August 2020.

The median home price in the Northeast was $349,500, up by 10.4% from August 2019.

"Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market," said Lawrence Yun, NAR’s chief economist. "Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery."

But the supply of available homes is shrinking.

Total housing inventory slipped by 0.7% to 1.49 million units at the end of August from July – and the number has plunged by 18.6% from 1.83 million one year ago.

Yun noted that scarce inventory has been a problem for the past few years, exacerbated in the past month by the dramatic surge in lumber prices and a shortage of lumber due to the California wildfires.

"Over recent months, we have seen lumber prices surge dramatically,” Yun said. “This has already led to an increase in the cost of multifamily housing and an even higher increase for single-family homes."

He also said that as more Americans choose to work from home during the pandemic, demand for housing in “attractive” areas will keep increasing – even after an effective vaccine is found.

"Housing demand is robust but supply is not, and this imbalance will inevitably harm affordability and hinder ownership opportunities," he said. "To assure broad gains in homeownership, more new homes need to be constructed."

Demand is expected to continue through the autumn.

“In early September, new housing supply took a hit from the wildfires and hurricanes, and sales activity weakened. But because the impact of natural disasters has been more supply-oriented than demand-oriented, prices are expected to remain high,” said Danielle Hale, chief economist with realtor.com. “The combination of high prices and low supply is going to continue to make finding a home an even more difficult task than it already is.”