Homebuyers were drawn into the housing market in October 2014 by low interest rates and a growing number of properties for sale, data from the NATIONAL ASSOCIATION OF REALTORS® show.
The median existing single-family home price hit $208,700 in October, up 5.5% from October 2013, marking the 32nd consecutive month of year-over-year price gains. The median condo/co-op price reached $205,400 in October, up 4.5% from a year ago.
The housing market this year has been a tale of two halves, says NAR Chief Economist Lawrence Yun.
“Sales activity in October reached its highest annual pace of the year as buyers continue to be encouraged by interest rates at lows not seen since last summer, improving levels of inventory, and stabilizing price growth,” he said. “Furthermore, the job market has shown continued strength in the past six months. This bodes well for solid demand to close out the year and the likelihood of additional months of year-over-year sales increases.”
Although each local market has its own ratio of sellers and buyers, nationally there’s a 5.1-month supply of homes for sale. Having a 6-month supply of homes for sale is considered a balanced market favoring neither buyers nor sellers.
“The growth in housing supply this year will likely prevent the drastic sales slowdown and coinciding spike in home prices we saw last winter due to low inventory,” says Yun. “However, more housing starts are needed to increase supply, meet current demand, and keep price growth in check.”
Who’s Buying Homes
Investors continued to be a significant factor in the real estate market, purchasing 15% of homes in October. The majority of those investors (65%) paid cash for the homes they purchased. Sellers often prefer cash buyers over homebuyers who have to qualify for a mortgage to complete the sale.
Only 29% of October’s homebuyers were first-time owners. That’s a much smaller proportion compared with prior years. On an annual basis, the share of first-time buyers is at its lowest level in nearly three decades.
Who’s Selling Homes
In another sign that the national real estate market has returned to health, only 7% of October sales were foreclosures and 2% were short sales. The fact that 91% of home sales were traditional sales is good news for homeowners whose property values can be affected by nearby financially distressed discounted home prices. Those lower, distressed values become comparable properties that lenders use to value surrounding homes during the mortgage process.
Foreclosures sold for an average discount of 15% below market value in October. Short sales (homes sold for less than what’s owed on the mortgage) were discounted 10% last month.
Although distressed home sales are down, NAR continues to be worried about the tax consequences for homeowners who lose their homes in a foreclosure and those who have to short-sell their homes. Those distressed homeowners can end up with a giant federal tax bill because the tax code says the amount the lender forgave during the foreclosure or short sale is income.
For example, if your home sells for $100,000 less than what you owed on your mortgage and your lender agreed to take the loss so you can short-sell your home, you could owe federal income tax on that $100,000.
That leaves homeowners faced with an awful choice between a tax bill they are unable to pay and losing their home, says NAR President Chris Polychron.
A prior law, The Mortgage Forgiveness Tax Relief Act, kept distressed homeowners from owing tax on forgiven mortgage debt. That law expired in 2013. NAR is lobbying Congress to renew The Mortgage Forgiveness Tax Relief Act and make it retroactive to protect 2014’s distressed homesellers.
Time on Market
|Home Type||Median Number of Days on Market|
October 2014 Regional Existing-Home Sales
|Sales Volume Compared with Sept. 2014||Oct. 2014 Median Price||Median Price Compared with Oct. 2013|
|Northeast||Up 2.9%||$246,900||Up 1.2%|
|Midwest||Up 5.1%||$164,100||Up 6.8%|
|South||Up 2.8%||$178,000||Up 5.1%|
|West||Down 5.0%||$296,800||Up 5.0%|