As we mentioned in our last market update, we received some important housing data about Existing Home Sales and New Construction data. Let's dive into the sales of existing homes first, as this report gives a good indication of the housing market's pulse.
According to the National Association of Realtors (NAR), sales of Existing Homes fell by about 1.5% last month. This marks the second consecutive month of decline in the number of homes available. Currently, we stand at about a 2-month supply of homes. Keep in mind that a normal, healthy market usually has about a 6-month supply of homes.
While the market is tight, this provides a great opportunity for those looking for homes. The increase in rates has led to a slight slowdown in purchase activity as well, meaning that sellers are now more willing to negotiate than in previous months. In addition, Zillow's most recent Home Value Index showed that homes have appreciated almost 15% in the past year. The slight increase in rates will be far outweighed by the appreciation new homeowners will see and when rates drop, they'll be able to refinance!
Lawrence Yun, the chief economist for the NAR made a great point regarding the differences in the current market and the market during the housing bubble, stating, "The current lack of supply underscores a vast contrast with the previous major market downturn from 2008 to 2010, when inventory levels were four times higher than they are today."
While we saw fewer new construction starts last month, the completion of new construction homes was up over 6%. It is clear that builders have slowed down their production, likely having learned their lesson after 2007.
We got a real-time look at builder confidence last week from the National Association of Home Builders (NAHB) Housing Market Index. Any reading of the index above 50 signals expansion, however, this month's report is the lowest since 2012 (except for at the start of the COVID outbreak).
Next week, we’ll be reviewing some more housing data. Specifically, home appreciation data from the Case-Shiller Home Price Index and the Federal Housing Finance Agency (FHFA) House Price Index. In addition, we'll take a look at the New and Pending Home Sales data for September. Stay tuned!
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