Closed sales of existing homes increased 9.4 percent from August to September, yielding a 20.9 percent increase year over year to a seasonally adjusted annualized rate (SAAR) of 6.54 million, the highest rate recorded since 2006.
With buyers still clamoring to hunker down in new homes during the pandemic, Zillow says demand won’t be waning anytime within the next few months.
However, early signs that demand may eventually slow have begun to emerge. Although seasonally adjusted purchase mortgage applications are still 25 percent higher than typical levels in recent years, those applications have dropped 7.9 percent from highs seen in mid-September.
Likewise, the National Association of Realtors’ (NAR) seasonally adjusted pending sales index, which indicates forthcoming closed sales in the next one to two months, took a slight downturn of 2.2 percent in September. This was the first monthly decline in the index since April.
During the final week in October, homes typically stayed on the market for just 12 days, 17 days less than the same period last year. A total of 25,158 listings went pending, volume typical of near-peak buying periods in late April and early July in 2019. Year over year, pending sales were up 19.7 percent, but were down 3.1 percent from the month before.
Amid red-hot demand, inventory continued to decline for the 23rd consecutive week, dropping 37.4 percent year over year. New listings were also down year over year by 7.4 percent, and down by 7.9 percent from the previous week.
As a result of intense demand and low inventory, list prices have continued to tick upwards year over year in every week since May, giving sellers a clear advantage. During the last week in October, the median listing price was up 11.8 percent from the previous year. However, compared to the week before, the typical list price was down about $500 to $345,000, the first weekly drop seen since mid-April.
Home value growth hasn’t ended yet, either — Zillow expects seasonally adjusted home values to rise by 2.9 percent between September and the end of 2020, and rise a total of 7 percent during the 12 months ending September 2021. In previous forecasts, the company predicted a 4.8 percent increase in home values between August 2020 and August 2021.
According to Zillow, home sales likely reached a peak in September, and will probably slow in upcoming months, falling to pre-pandemic levels by January 2021. However, growth should ramp back up again come spring, and will likely be above pre-pandemic volume through most of the year.
“This short-term deceleration in sales volume can be attributed in large part to an expected slowdown in GDP growth, the fading impact of historically low mortgage rates, fewer sales occurring that were deferred from earlier this year and historically low levels of for-sale inventory,” Zillow’s report reads. “An expected reacceleration of GDP growth in 2021 should help push sales volumes higher.”