September 2020 Headline Existing Home Sales Now Has Four Straight Months Of Significant Sales Gain

Written by Steven Hansen

The headline existing home sales improved relative to last month with the NAR stating “Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season”. This was a record month for October home sales.

Econintersect Analysis

• The unadjusted sales rate of growth accelerated 19.1 % month-over-month, up 24.4 % year-over-year – sales growth rate trend significantly accelerated using the 3-month moving average.
• The unadjusted price rate of growth accelerated by 3.0 % month-over-month, up 11.6 % year-over-year
• The homes for sale unadjusted inventory marginally declined this month compared to last month and is down 19.2 % year-over-year

NAR reported:

• Sales up 9.4 % month-over-month, up 20.9 % year-over-year (reported last month +10.5% year-over-year)
• More than 7 in 10 homes sold in September 2020 – 71% – were on the market for less than a month.
• Prices up 14.8 % year-over-year
• The market (from Econoday) expected an existing home sales level of 5.8 M to 6.4 M (consensus 6.2M) with a reported value of 6.54 million

The graph below presents the unadjusted home sales volumes comparing growth in every month.

Here are the headline words from Lawrence Yun, NAR’s chief economist:

Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season. 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.

There is no shortage of hopeful, potential buyers, but inventory is historically low. To their credit, we have seen some homebuilders move to ramp up supply, but a need for even more production still exists.

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.

To remove the seasonality of home prices, here is a year-over-year graph that demonstrates a general improving home price rate of growth.

Econintersect does a more complete analysis of home prices with the Case-Shiller analysis.

The home price situation according to the NAR:

The median existing-home price2 for all housing types in September was $311,800, up 14.8% from September 2019 ($271,500), as prices rose in every region. September’s national price increase marks 103 straight months of year-over-year gains.

According to the NAR;

First-time buyers were responsible for 31% of sales in September, down from the 33% in both August 2020 and September 2019. NAR’s 2019 Profile of Home Buyers and Sellers – released in late 20194 – revealed that the annual share of first-time buyers was 33%.

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.

Unadjusted Inventories are below the levels of one year ago.

Total housing inventory at the end of September totaled 1.47 million units, down 1.3% from August and down 19.2% from one year ago (1.82 million). Unsold inventory sits at a 2.7-month supply at the current sales pace, down from 3.0 months in August and down from the 4.0-month figure recorded in September 2019.

Caveats on Use of NAR Existing Home Sales Data

The National Association of Realtors (NAR) is a trade organization. Their analysis tends to understate the bad and overstate the good. However, the raw (and unadjusted) data is released which allows a completely unbiased analysis. Econintersect analyzes using the raw data. Also, note the National Association of Realtors (NAR) new methodology has a moderate back revision to the data – so it is best to look at trends, and not get too excited about each month’s release.

Econintersect determines the month-over-month change by subtracting the current month’s year-over-year change from the previous month’s year-over-year change. This is the best of the bad options available to determine month-over-month trends – as the preferred methodology would be to use multi-year data (but the New Normal effects and the Great Recession distort historical data).

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