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Economic & Housing Weekly Note

Existing Home Sales and Housing Starts Continue to Exceed Expectations

October 23, 2020

Key Takeaways:

  • Existing home sales jumped 9.4 percent to a seasonally adjusted annualized rate (SAAR) of 6.5 million in September, according to the National Association of REALTORS®. This represented the fourth straight month of growth and the highest level since May 2006. Sales rose in every region, with sales in the South jumping past the prior 2005 peak to a new all-time high. Despite the impressive monthly gain, total sales were essentially flat year to date compared to the same period a year ago. This suggests that observers should be careful interpreting the seasonalized data as the normal seasonal pattern was disrupted by the incursion of the COVID pandemic at peak homebuying season. Sales of single-family homes rose 9.7 percent to a SAAR of 5.9 million, while sales of condos/co-ops rose 6.3 percent to 670,000. The number of homes for sale (not seasonally adjusted) fell 19.2 percent year over year, the sixteenth consecutive month of declining inventories. The months’ supply fell three-tenths to 2.7, the lowest reading since the series began in 1999. The median home price was $311,800, up 14.8 percent from a year ago, the fastest annual pace of growth in almost 15 years. On a quarterly basis, existing home sales rose by a record 42 percent, averaging around 6.1 million units for the third quarter.
  • Housing starts rose 1.9 percent in September to a SAAR of 1.42 million, according to the Census Bureau. This increase was driven entirely by single-family starts, which rose 8.5 percent to 1.11 million units, the highest level since June 2007. Single-family permits rose 7.8 percent to a SAAR of 1.12 million, the highest level since March 2007. Multifamily starts fell 16.3 percent to 307,000. On a quarterly basis, single-family starts rose 35.8 percent in Q3 to 1.04 million, the largest quarterly growth in 40 years.
  • The National Association of Home Builders/Wells Fargo Housing Market Index rose 2 points in October to 85, the highest reading since the series began in 1985. Both the components for present sales and sales over the next six months increased to record levels, while the component which tracks the traffic of prospective buyers was unchanged from September but also tied with the record high.
  • The Conference Board Leading Economic Index (LEI), a gauge of the economic outlook over the next three to six months, rose 0.7 percent in September. According to the press release, the increase was “driven primarily by declining unemployment claims and rising housing permits,” though it also noted that “the decelerating pace of improvement suggests the U.S. economy could be losing momentum heading into the final quarter of 2020.”
Forecast Impact:

The strength in September existing home sales once again highlights the current resiliency in the housing market and suggests that we may need to increase our expectations for existing sales in the fourth quarter. However, inventories of existing homes for sale are at a record low, which is driving up prices and will likely limit the amount by which existing sales can rise. Although with builder sentiment hitting a record high in October and housing starts continuing their upward trend, we believe new home sales will likely continue to become a larger portion of total sales. The continued strength in single-family permits suggests even more new construction in the coming months, which should help inventories meet the impressive current level of demand.


Ricky Goyette
Economic and Strategic Research Group
October 23, 2020

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