Housing sector

National Association of Realtors Chief Economist: ‘The housing sector is clearly stabilizing’

By Anna Bahney, CNN Business

The housing market is starting to look a little more normal.

Home sales fell in August from both July and a year ago, breaking two straight months of increases, according to National Association of Realtors.

Home purchases have increased over the past year, which Lawrence Yun, NAR’s chief economist, says is an anomaly. These increases were driven by pent-up demand from potential buyers that has built up during the lockdowns and the lifestyle changes people have made during the pandemic, all while interest rates have remained very low, did he declare.

But now the effects of these trends are waning.

“The housing sector is clearly calming down,” Yun said. “Home sales are trying to get back to a normal balance after the big increase we saw last year.”

Sales of existing homes, which include single-family homes, townhouses, condominiums and co-ops, fell 2% in August from July and were down 1.5% from a year ago , according to the report.

But sales are still above the pre-pandemic rate, Yun said. And sales for 2021 year-to-date are 16% higher than 2020 and 12% higher than 2019.

Moreover, prices continue to rise.

The median home price in August was $356,700, up 14.9% from a year ago, marking 114 consecutive months of year-over-year home price increases. Let’s be clear: a 14.9% annual price increase is not normal, Yun said. Around 3% to 5% is a more typical annual price increase. But compared to the more than 20% price growth reported by the NAR in recent months, this price drop shows some narrowing of that gap.

“Sales fell slightly in August as prices rose nationwide,” Yun said. “Potential buyers are looking, but much more measured about their financial limits, and just waiting for more inventory.

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Inventories remained stubbornly low in August, continuing to drive down sales at the bottom of the market, NAR said.

“High house prices are creating an unbalanced market, but prices would normalize with more supply,” Yun said.

Unsold home inventory at the end of August was 1.29 million, down 1.5% from July and 13.4% from a year ago, according to NAR. Unsold inventory is at a 2.6 month supply at the current selling rate. A balanced market has about a six month supply.

But there are signs of a slightly calmer, if not kinder and softer housing market.

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“Overall, we expect home sales to remain strong into next year, but we should see inventory levels continue to slowly trend towards more normal levels and home price appreciation begin to slow down over time,” said Ruben Gonzalez, chief economist at Keller Williams.

For budding buyers, some of the scariest parts of buying a home last spring and fall — like waiving inspections and competing with many multiple offers and facing offers entirely in cash – have subsided, Yun said, citing inquiries from NAR agents.

But a typical property still sells for a quick 17 days to market, according to the report. In August, 87% of homes sold had been on the market for less than a month.

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Even if the market stabilizes, affordability remains a challenge.

The share of first-time homebuyers fell to 29% in August, the lowest rate since January 2019.

“Securing a home is always a major challenge for many potential buyers,” Yun said. “A number of potential buyers have simply paused their search, but their desire and need for a home remains.”