The US existing-home sales market saw a resurgence in November, exceeding a 4 million annualized rate for the first time in six months. This positive trend suggests that buyers are gradually adjusting to mortgage rates above 6%.
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Contract closings experienced a 4.8% increase, reaching an annualized rate of 4.15 million in November, the highest since March, according to data released by the National Association of Realtors (NAR). This figure surpassed the median estimate of 4.09 million projected by economists surveyed by Bloomberg.
NAR Chief Economist Lawrence Yun attributed this momentum to growing consumer comfort with current mortgage rates and robust job creation. While rates remain elevated, Yun noted during a press call that the strong labor market is bolstering buyer confidence.
Despite November’s improvement, the existing-home market has remained relatively flat over the past two years, with annual sales hovering around 4 million. This level represents only three-quarters of the pre-pandemic trend. A significant factor contributing to this stagnation is the persistent shortage of homes for sale, as homeowners are reluctant to relinquish their existing low mortgage rates around 3%. This reluctance has, in turn, fueled price appreciation.
Yun further indicated that annual home sales are projected to be even lower than last year, which marked the worst performance since 1995.
A gradual increase in housing inventory has been observed this year as sellers begin to adapt to the prevailing high borrowing costs. Although supply dipped slightly in November compared to October, a seasonal trend, it remained significantly higher than in November of the previous year.
Robert Frick, corporate economist at Navy Federal Credit Union, characterized this shift as a “thaw” in the existing home market, driven by rising inventories and pent-up demand. However, he cautioned that high prices and relatively high mortgage rates will continue to constrain sales growth.
Affordability Remains a Key Challenge
The persistent challenge of affordability continues to weigh on the market. The median sale price for an existing home rose by 4.7% year-over-year to $406,100 in November, setting a new record for the month. Despite the Federal Reserve’s recent interest rate reductions, mortgage rates remain double their level at the end of 2021. The Mortgage Bankers Association anticipates rates will stay above 6% for at least the next two years.
Data from the MBA reveals that the average rate for a 30-year fixed-rate mortgage was 6.75% in the week ending December 13th. Treasury yields, which directly influence mortgage rates, surged on Wednesday following the Fed’s final meeting of 2024, where policymakers signaled fewer rate cuts than previously anticipated next year.
Federal Reserve Chair Jerome Powell acknowledged the ongoing weakness in the housing sector following the meeting. While noting that housing inflation is moderating, he expressed that the pace of cooling remains slower than desired.
In November, 53% of homes sold were on the market for less than a month, down from 59% in October. Meanwhile, 18% of homes sold above the listing price. The average time a property spent on the market was 32 days, compared to 29 days in the preceding month.
Existing-home sales constitute the majority of total US home sales and are recorded upon contract closure. Data on new-home sales will be released by the government on Tuesday.
