Despite pandemic disruptions, the October 2020 housing report shows a market in overall improvement. Record-breaking low mortgage rates have prompted buyers to invest in properties and purchase new homes despite uncertain conditions. Market trends continue to look promising.

As confidence in the housing market grows, more and more sellers are returning to the market. Western and northeastern metros saw more newly listed homes in October 2020 than in 2019. Additionally, homes are selling fast across most regions, with prices increasing to all-time highs.

These and other revelations came from the Department of Housing and Urban Development (HUD) October 2020 housing report.

New Home Purchases

After an initial slip in early 2019, new home purchases are rising. In September, new single-family home sales decreased by 3.5% from August but remained 32.1% higher than in 2019. Limited new homes and an ever-tightening inventory are likely to restrict more sales, despite historically low interest rates.

Existing Home Sales

Existing home sales have experienced a four-month spike. September sales increased by 9.4%, reaching 6.54 million units. That is 20.9% higher than the figures from the previous year. The increase is largely due to low interest rates and easing of social-distancing measures during previous months.

New Home Construction

New home construction steadily increased in 2020. New home construction for single-family homes reached its highest pace since June 2007, after an 8.5% increase in September, totaling 1.108 million homes. Even though multi-family housing dropped by 14.7% since August, total housing starts experienced an increase of 1.9% this month, totaling 1.415 million new units.

Home Prices

Year-over-year home price increases accelerated this month. Annual gains now range between 5 and 8%. This is a marked increase from the average 6.5% annual gain in July, and a staggering 32% up from their April 2007 peak, reflecting economic recovery after social distancing measures subside.

Homes on the Market

The number of homes on the market tells a tale of two halves. Inventories of new homes on the market rose in October, but existing homes have proven harder to come by. Listed inventories of new homes increased by 0.7% from August. In contrast, the number of existing homes on the market decreased by 1.3% over the month of August, marking a 19.2% drop year-over-year.

Homeownership Rate

Homeownership rates are in decline, but the Census Bureau has attributed this to a break in the series resulting from reduced data collection due to Covid-19. Official reports show that the U.S homeownership rate declined to 67.4% in the third quarter. But data collection was less rigorous than usual. The Census Bureau was forced to replace in-person interviews with telephone equivalents.

Forbearance

The share of mortgage loans in forbearance decreased to 5.90% in October from a high of 8.55% last June, according to the MBA Weekly Forbearance and Call Volume Survey. Forbearance on mortgages has continued to decline, with an estimated 3 million homeowners in forbearance plans.

Mortgage Rates

Mortgage rates in continued decline reached an all-time low for the eleventh time since March. Before March 2020, record lows for a 30-year FRM stood at 3.31% in November 2012. These figures reduced dramatically in October with average weekly record lows of 2.8%.

Housing Report October 2020 in Summary

According to the October housing report, despite pandemic speculation, the housing market has remained strong. New and existing home purchases are up. Construction is going strong. Home prices continue to rise, while forbearance and mortgage rates remain at all-time lows. However, inventories remain limited, and though data shows that homeownership is down, once social-distancing is over, this is likely to recover quickly.