Existing home sales fell by 1.7% in September to an adjusted annual rate of 4.75 million, just below analysts’ expectations for 4.8 million, according to the National Association of Realtors. But inventory fell by 3.3% to 2.3 million homes, or about 5.9 months worth of supply. It was the first time that inventory fell below 6 months of supply since March 2006, and the decline could put more upward pressure on housing prices. Prices in September were up 11.3% year over year.
“The shrinkage in housing supply is supporting ongoing price growth, a pattern that could accelerate unless home builders robustly ramp up production,” NAR Chief Economist Lawrence Yun said.
That news may be why homebuilders are on the rise after the report, even though the broader market has extended its slump. The Dow was recently off about 110 points.
“Despite occasional month-to-month setbacks, we’re experiencing a genuine recovery,” Yun said. “More people are attempting to buy homes than are able to qualify for mortgages, and recent price increases are not deterring buyer interest. Rather, inventory shortages are limiting sales, notably in parts of the West.”