Last month we talked about the housing market’s V-shaped recovery, but third-quarter home sales exceeded those expectations — despite record unemployment and uncertainty caused by the COVID-19 pandemic.

Bolstered by super-low mortgage rates, August home sales reached their highest pace since 2006; existing home sales were up 10.5% compared to August 2019 and new home sales were up a whopping 43.2 percent (up 4.8% from July).

“Homes sales continue to amaze,” said Lawrence Yun, the National Association of Realtors’ chief economist, “and there are plenty of buyers in the pipeline ready to enter the market. Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery.”

Home prices were also up — 11.4% in August compared to a year ago — which makes 102 consecutive months of year-over-year price gains. It’s easy to understand when you consider that the number of existing homes for sale dropped by 18.6% compared to August 2019.

Since the beginning of the pandemic in March, almost 400,000 fewer homes have been listed compared to the same period last year, according to Realtor.com.

"Housing demand is robust but supply is not, and this imbalance will inevitably harm affordability and hinder ownership opportunities," Yun said.

It may happen sooner rather than later. From August to September, pending home sales dropped 2.2% as potential homebuyers were priced out of the market — a surprise to analysts, who had predicted a modest monthly gain. (Pending sales were still up 20.5% year over year, however.)

Was it just a bump in the road, or a downtrend that will continue through the end of the year?

“The benefits of low interest rates have been completely erased by steep price gains, especially in expensive urban markets,” said George Ratiu, senior economist at realtor.com. “As a result, we can expect affordability to play a much larger role in housing over the coming months, as wage growth cannot keep pace with rising home prices.”

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