Inventory shortages, combined with frequent mortgage estimate requests, have pushed home prices to peak levels, according to a newly released sales report.
The median sales price for a single-family home reached $207,500 in October, including condominiums, based on recent numbers detailed by real estate information firm RealtyTrac. That’s up 1 percent from September and by 10 percent year-over-year. The double-digit increase is the largest recorded in over a year and a half.
“October was a record month for home prices in 33 MSAs.”
The U.S. Home Sales Report, a monthly analysis that tracks house values online, used data from 94 major metropolitan statistical areas. Of these, more than one-third – 35 percent – reached an all-time price high through 10 months of the year.
Daren Blomquist, RealtyTrac vice president, pointed out that the autumn season is typically a period where buying and selling slows down, similar to the way Mother Nature does when temperatures cool.
“Home price appreciation did not go into hibernation in October even as the housing market entered the typically slower fall season,” Blomquist said. “More than one-third of the nation’s major housing markets have now reached new home price peaks this year, and nearly 90 percent of markets posted an annual increase in home prices in October.”
He added that current homeowners who put their homes on the auction block have done well on their investment, turning an average profit of 16 percent. That’s the largest monthly margin in almost eight years.
Strong pending home sales heralds promising future
Pending home sales – which measure residential real estate transactions based on the number of contracts signed, many coming after taking advantage of free house price estimates – have also gained ground, this after two consecutive months in which they fell. The National Association of Realtors’ Pending Home Sales Index climbed to just shy of 108 in October, a four-point gain from the same 31-day period last year.
Michael Mahon, president of HER Realtors, referenced the NAR’s pending home sales report as proof positive that housing demand will stay solid nationally for at least the early part of 2016, but thereafter remains questionable given the spotty inventory situation and regulatory scrutiny.
“There remains concern over a decrease in overall closed volume for the fourth quarter of 2015,” Mahon mentioned. “This concern squarely rests on continued delays in the housing transaction cycle involving new government regulatory procedures of [TILA-RESPA Integrated Disclosure].”
“TRID delaying closing times by up to 15 days.”
As an example, Mahon said that before October, housing transactions were taking anywhere from 30 and 45 days to close. Since the TRID regulations have gone into effect, though, the typical closing period has risen to between 45 and 70 days.
Despite the added time, affordable mortgage quotes are prompting prospective buyers to take advantage of the favorable financing climate while it lasts. Mortgage application activity has maintained a healthy level for most of the year. In the Mortgage Bankers Association’s most recent report, mortgage volume fell just 0.2 percent from the previous seven-day period for the week ending Nov. 27. Of those who got a mortgage estimate, 56 percent did so to refinance.