U.S. Home Sales Could Reach Highest Level Since 2006

Despite high prices, home buyers aren't backing away.

It's often the case that home sales peak during the spring and summer and then start to taper off as the year winds down. But so far, that hasn't happened this year.

In September, existing home sales rose 7% from the previous month, reports the National Association of Realtors. In October, home sales notched upward by 0.8% compared to September.

All told, this year's home sales are on track to surpass the 6 million mark. That would amount to the highest number of existing homes sold since 2006.

Despite challenges, home buyers aren't holding back

This year has been a tough one for potential home buyers to navigate. There's been an extremely limited number of homes available on the market, and that's caused a lot of properties this year to wind up subject to bidding wars.

Bidding wars are great for sellers because they commonly result in higher sale prices. They can also drive up home prices in general.

The latter is what's happened this year, without a doubt. The National Association of Realtors reports that the median sale price for existing homes in October was $353,900. That's a 13% increase from October 2020. It also marks 116 straight months of year over year home price increases. That's the longest streak on record.

So why have buyers been clamoring for homes when supply has been low, and prices have been so high? We can thank low mortgage rates for that.

Though mortgage rates haven't been sitting at the same record low levels as last year, they've still been quite competitive throughout 2021. Buyers looking to lock in affordable financing have been willing to pay up for homes.

Compounding buyer interest is the fact that rent prices have soared this year, too. After many landlords were forced to offer up major discounts in 2020 to entice tenants to sign leases, this year, they're moving forward with rent hikes. For some buyers, purchasing a place of their own may, at this point, make more financial sense than paying a premium for a rental they can't build any home equity in.

Will 2022 be a better time to buy a home?

It's hard to say. There's a good chance mortgage rates will remain competitive well into the new year. But whether housing inventory opens up enough to bring home prices down is another story.

As of the end of October, there were only 1.25 million homes for sale. That represents a 12% decrease from the previous October. It also means the housing market only has about half the number of homes it needs to create a more balanced scenario where neither buyers or sellers have the clear upper hand.

If things improve with regard to the pandemic and the economy continues to recover from the blow it faced in 2020, we could see more homes get listed as 2022 moves along. But that's not guaranteed to happen, and so 2022 could end up being another tough year on the home buying front.