Advertiser Disclosure

advertising disclaimer
Skip to main content
neighborhood homes

Existing Home Sales Fall Again, Highlighting the Market’s Major Inventory Problem


Dec 19, 2019 by Aly J. Yale
Get our 43-Page Guide to Real Estate Investing Today!

Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.

*By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

The latest existing home sales numbers were just released, and according to the data, October’s increase may have been just a blip on the radar.

According to the National Association of Realtors, existing home sales were down again in November, dropping 1.7% over the month and 2.7% from one year prior. In October, sales of existing homes were up 1.9% for the month and 4.6% over the year. NAR is calling it “a small step back.”

Regionally, November's existing home sales rose in the Midwest (2.3%) and Northeast (1.4%) but fell in the South (-3.9%) and West (-3.5%).

Lawrence Yun, chief economist at NAR, says the overall decrease was expected, given the market’s low levels of inventory.

“Sales will be choppy when inventory levels are low, but the economy is otherwise performing very well with more than 2 million job gains in the past year,” he said.

Just how bad is the inventory problem? NAR’s data shows total housing supply down 5.7% from last November. There’s currently a 3.7-month supply of homes -- down from 3.9 months a month prior. It's the fifth straight month inventory has declined.

If you’re thinking of investing in an existing home in 2020, here’s some other data to keep in mind from NAR’s release:

  • Properties are selling faster. Existing homes stayed on the market for 38 days in November -- down from 42 days last year.
  • First-time buyers are making themselves known. They accounted for 32% of all existing home sales for the month.
  • Investors are making more moves, too. Investors and second-home buyers made up 16% of existing home sales, a jump from 13% a year prior.
  • Foreclosures and short sales were minimal. Mortgage delinquencies are at historic lows, so it’s no wonder distressed sales only accounted for a mere 2% of all existing home sales in November.
  • The average existing home price is up. There was a 20% drop in existing homes sold below the $250K price point.

Fortunately, Yun says affordability should improve as we get further into 2020.

"I expect to see home price affordability improvements, too, Yun said. “This year we witnessed housing costs grow faster than income, but the expectation is for prices to settle at a more reasonable level in the coming year in line with average hourly wage growth of 3% on a year-over-year basis."

The bottom line

Existing home sales (and inventory) are low. If you’re thinking of investing in a new property this year (single-family rents are increasing!), it might be time to look toward new construction instead. Experts say residential construction should rise significantly in the next year; plus, new homes come with a host of major benefits.

Got $1,000? The 10 Top Investments We’d Make Right Now

Our team of analysts agrees. These 10 real estate plays are the best ways to invest in real estate right now. By signing up to be a member of Real Estate Winners, you’ll get access to our 10 best ideas and new investment ideas every month.

Find out how you can get started with Real Estate Winners by clicking here.

The Motley Fool has a disclosure policy.