Existing Home Sales Remain Subdued, While Signs Point to Continued Strength in New Home Construction

Key Takeaways:

• Existing home sales increased 3.4 percent to a seasonally adjusted annualized rate (SAAR) of 3.96 million in October, a three-month high, according to the National Association of REALTORS® (NAR). In comparison, the number of homes available on the market rose just 0.7 percent; therefore, the months’ supply fell one-tenth to 4.2. Compared to a year ago, the NAR’s measure of the median sales price of existing homes was up 4.0 percent.
• Housing starts declined 3.1 percent to a SAAR of 1.31 million in October, according to the Census Bureau. Single-family starts declined 6.9 percent to a SAAR of 970,000, a three-month low. However, this was likely due in large part to hurricane disruptions, as single-family starts in the South declined 10.2 percent. Nationwide, the typically more indicative single-family permits series increased 0.5 percent to a SAAR of 968,000. On the multifamily side, starts increased 9.6 percent to a SAAR of 341,000, while permits declined 3.0 percent to a SAAR of 448,000.
• The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index increased 3 points to 46 in November, the highest level since April. The index for single-family sales in the present moved up 2 points and the index for the traffic of prospective buyers was up 3 points to 32. The largest mover was the index for sales in the next six months, which jumped 7 points to 64, the highest level since April 2022.

Forecast Impact:

While we had expected an increase in existing home sales in October, the sales figure was somewhat weaker than expected given the comparatively larger rise in pending sales in September. October sales likely represent most of the bump up in sales we’re going to see from the brief mortgage rate dip in September, as weekly mortgage application data suggest that sales are likely to decline somewhat again to end 2024. Given affordability constraints and a strengthened lock-in effect from the recent rise in interest rates, we expect only a modest improvement in existing sales in 2025.

The new home market remained strong in October. Despite the pullback in single-family starts, which we had expected given disruptions from hurricanes Helene and Milton, single-family permits climbed to their highest level since April. Combined with an increase in homebuilder confidence, particularly in the forward-looking measure for sales over the next six months, we expect single-family construction to rebound in November and remain on a strong trend through our forecast horizon.

Nathaniel Drake
Economic and Strategic Research Group
November 22, 2024

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