Homes Sales Down in November

By | November 29, 2020

Uh oh!  Call the economic paramedics!  Housing purchases have slid for 3 straight months.  Who didn’t see that coming?  The housing market had more momentum then a comet and home prices were increasing just as fast.  The shift in momentum should be seen as a bright light, not a negative to the housing market.  Rising prices and borrowing costs in addition to the Fed Shutdown have contributed to the shift.  At the same time, builder confidence has picked up along with new construction as replacement cost is cheaper in some markets now then the value of a comparable older house.

Cash transactions are still prevalent though.  Over 32% of all purchases nationwide have been cash purchases, up from 30% a year earlier.  Sales of distressed homes / properties, including foreclosures accounted for 14% of the total last month.

Interestingly, the national homeownership rate has declined from 69% to 65%.  This shift from owner-occupants to tenant-occupants is one of the reason that metropolitan areas across the nation have seen drastic increases in rental rates.  The increased rental prices and the expectation of future capital gains have encouraged investors to purchase single-family homes in the low and middle tiers and generated a new housing boom. These observations suggest the current housing boom is the first nationwide boom since the postwar era not driven by increased demand for owner-occupied housing. The current episode could solidify the idea that housing booms can be driven entirely by investors.

For northern NJ, we are entering the trend of lower sales during winter months.  Watch home sales and what happens with the US Treasury.  We believe that home prices are going to continue to increase at a more moderate rate as opposed to the spike we have seen (more appropriate).  Watch more suburban families urbanize and the effect this will have one high priced property rental rates.