When new home sales are falling because there isn’t enough supply to meet demand, the only short term solution to balance the market is for prices to go up. It takes time to build new supply, but many of this year’s home buyers are trying to escape the city now. They want to have Christmas away from the densely crowded, COVID-filled cities, and they don’t care how much it costs.
A combination of rising prices and short supply actually pushed down the number of sales in November. The Wall Street Journal reports:
Homes sales slipped in November as the supply of properties for sale fell to a new low, the latest sign strong economic momentum in the middle of the year is easing in 2020’s final months.
Existing-home sales fell 2.5% in November from October to a seasonally adjusted annual rate of 6.69 million, the National Association of Realtors said Tuesday. It was the first decline in six months. The November sales of previously owned homes, which make up most of the housing market, rose 25.8% from a year earlier.
“Without a doubt, there are too many buyers in relation to the sellers,” said Lawrence Yun, NAR’s chief economist. “That is probably the main driver as to why the sales declined.”
Separately, U.S. consumers’ outlook on the economy darkened in December as coronavirus cases climbed nationwide, the Conference Board, a private research group, said Tuesday.
Meanwhile, economic growth during the summer months was revised slightly higher to a 33.4% annual pace, the Commerce Department said Tuesday. The gain came after the economy contracted during the first half of the year. Economists project a slower pace of growth in the final three months of 2020.
Record-low interest rates have boosted homebuying demand in recent months. Existing-home sales rose for five straight months through October to the highest seasonally adjusted annual rate since 2006. At the same time, fears of virus transmission have made potential sellers wary of putting their homes on the market.
The supply of homes on the market at the end of November was the lowest level on record going back to 1982. A widespread shortage of homes for sale has prompted competition among buyers and pushed prices higher.
The median existing-home price rose 14.6% from a year earlier to $310,800, NAR said.
Rising prices are making it difficult for first-time buyers to enter the market, real-estate agents say.
Americans are building themselves an “island” life, away from the troubles of the city. They want their families to enjoy peace and health this year.
Action Line: take time in 2021 to build your own island life anywhere you can.
