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Housing starts and home sales: Where we stood in September

Housing starts and home sales: Where we stood in September

Existing home sales defied expectations in September when they increased 0.7 percent, according to the National Association of Realtors. Economists polled by Reuters had previously anticipated a drop in sales of 1 percent.

The increase pushed sales to a seasonally adjusted annual rate of 5.39 million. But despite the surprise rise in sales, they were still relatively low. September 2016 saw 1.5 percent more sales, and last month was the second-slowest all year, trailing August's rate of just 5.35 million.

NAR Chief Economist Lawrence Yun pointed out that Hurricanes Harvey and Irma considerably affected the market.

"Sales activity likely would have been somewhat stronger if not for the fact that parts of Texas and South Florida – hit by Hurricanes Harvey and Irma – saw temporary, but notable declines," Yun said in a press release.

Inventory remains an issue

Another major factor slowing home sales is the long-term trend of insufficient inventory. By the end of September, it did increase 1.6 percent to 1.90 million, a 4.2-month supply at current sales pace. While the uptick is a positive thing, it still remains considerably low compared to September 2016's stock of 2.03 million.

According to the U.S. Census Bureau, privately owned housing completions increased 1.1 percent compared to August, bringing the seasonally adjusted annual rate to 1,109,000.

Meanwhile, housing starts declined 4.7 percent. Work on 1,127,000 privately owned housing starts began last month, compared to 1,183,000 in August. On a positive note, last month's starts were higher than September 2016, which only saw 1,062,000.

There were 1,215,000 building permits authorized in September, 4.5 percent lower than the figure from one month prior.

Limited inventory has multiple implications for homebuyers. Not only are there limited choices, but there's also likely to be more competition that can drive prices higher. However, as we head toward colder weather, there are fewer buyers likely to be vying for a purchase, which could work in a prospective buyer's favor.

To learn about the mortgage process or to get started, reach out to The Federal Savings Bank.