Monthly home sales fell for only the second time this year, as low inventories and fierce competition pushed some buyers to the sidelines while material and labor shortages slowed construction of new homes.
Single-family home sales fell 5.2 percent in October from a year earlier to about 8,700, the Houston Association of Realtors reported Wednesday, with July the only other month this year to experience a year-over-year sales decline. While the housing frenzy might have cooled, however, prices haven’t. The median sales price jumped about 15 percent from a year earlier to $305,000.
Homes have sold at torrid pace for higher and higher prices, driven by low mortgage rates and lifestyle changes, such as desire for more space, spurred by the pandemic. Even with October’s decline, closed home sales are still on pace for another record-breaking year.
And the slide could be short-lived. The number of homes under contract climbed more than 8 percent in October, forecasting another rise in closed sales in coming months.
“Housing markets move in cycles, especially after churning at record levels for months on end,” said Richard Miranda, chairman of the Houston Association of Realtors. “We cannot rule out the possibility that some homebuyers are holding off until there is more inventory from which to choose.”
Homes are still moving at a strong clip, staying on the market for an average of just 32 days, according to HAR. Inventories, however, are not keeping up; active listings fell by 11.4 percent last month compared with the same period last year.
Tight inventories and tough competition have contributed to buyers routinely offering $10,000 or more over asking prices, said LaDonna Parker, a broker at Keller Williams Realty. She said she expects the market to stay hot and inventories to rise as the COVID-19 pandemic fades from view. Vaccinations are increasing and new drugs to treat the disease in the pipeline.
“Overall, I think sellers — especially those who want to cash out — they are starting to get those homes up and on the market,” she said. “The spring market will be very robust.”
The supply chain problems affecting so many goods and industries contributed to the shortage of homes on the market. Difficulties obtaining materials, as well as workers, has slowed the pace of both new home construction and sales, said Miranda. Lumber, windows and metals have been particularly hard to come by, said John Schiegg, vice president of supply chain for the Houston homebuilder David Weekley Homes, and that is increasing costs and prices.
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“It’s tough. We really thought we’d be out of this by (now), but it’s actually gotten worst,” said Schiegg. “People are simply saying, ‘If you want us to ship this material or show up on the job site, here’s the new price.’”
Building new homes is typically taking more than nine months, compared to six months pre-pandemic. But Schiegg is not necessarily complaining.
“Home building is still booming,” he said.