Flight from the Cities: Supply of Existing Homes for Sale Hits Record Low

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Sales of previously owned U.S. homes fell in November as supply fell to a record low and prices continued to climb.

Existing-home sales fell 2.5 percent in November from October to a seasonally adjusted annual rate of 6.69 million, the National Association of Realtors said Tuesday. But even with the decline, sales are up a massive 25.8 percent compared with a year ago.

This was the highest sales rate for November since 2005.

The push for big-city residents to buy homes away from dense urban centers has created a severe shortage of houses on the market. Total housing inventory declined from the prior month and one year ago to 1.28 million, enough to last 2.3 months at the current sales pace – both record-low figures. That represents a 22 percent decline compared with a year ago.

“Housing affordability, which had greatly benefitted from falling mortgage rates, are now being challenged due to record-high home prices,” said Lawrence Yun, NAR’s chief economist. “That could place strain on some potential consumers, particularly first-time buyers.”

The median existing-home price was $310,800, 14.6% more than in November 2019.

Demand for homes has been especially strong in the high end of the market. Sales of single-family homes priced between $750,0000 and $1 million are up 85 percent compared with a year ago. Houses priced over $1 million are up 88 percent.  Each of those ranges accounts for about 4.5 percent of the total market.

In the south and northeast, sales of million-dollar or more houses are up over 100 percent. The supply of homes priced over one million dollars is up 8.3 percent in the northeast, reflecting the upward pressure on home prices pushing more homes into the top of the price range.

More moderately priced single-family homes have seen gains in sales volumes as well. In the price range of $250,000 to $500,000—comprising 41.5 percent of the market—sales are up 37.3 percent compared with a year ago. For houses priced between $500,000 and $750,00, sales are up 64.9 percent. These make up 12.9 percent of the existing home market nationwide.

Sales of homes between $100,000 and $250,000—32.2 percent of the market—are essentially flat for the year. Sales of cheaper homes, which account for 5.4 percent of the market nationwide and 11 percent in the midwest—are down 21.7 percent compared with a year ago.

Homes are selling quickly. Properties typically remained on the market for 21 days in November, seasonally even with October and down from 38 days in November 2019. Seventy-three percent of homes sold in November 2020 were on the market for less than a month.

First-time buyers were responsible for 32 percent of sales in November, equal to the percentage seen in both October 2020 and November 2019. But since total sales are up, this indicates a surge of first-time home buying.

The lockdowns caused a temporary pause in home buying and likely created some pent up demand. Once the lockdowns were lifted, the housing market took off. A broad range of factors—from looting and rising murder rates to closed schools to working from home and lockdowns of urban amenities such as museums, theaters, and restaurants—has pressed Americans to speed up purchasing plans and pushed renters to decide to become home buyers.

–The Associated Press contributed to this report.

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