November Sees a 0.8% Increase in Sales
In November, existing home sales in the U.S. experienced a rebound from their lowest level in 13 years. The easing mortgage rates enticed potential homebuyers back into the market. According to new data released by the National Association of Realtors (NAR), sales of previously owned homes rose by 0.8% from the previous month, reaching an annual rate of 3.82 million units. This positive development put an end to a five-month losing streak.
Slowest Pace of Sales Since August 2010
Despite the increase in sales, the numbers still reflect a decline compared to the same period in 2022. Existing home sales are down 7.3% on an annual basis. Lawrence Yun, NAR’s chief economist, explained that the recent weakness in sales can be attributed to the high mortgage rates experienced in October, which subsequently resulted in a slowdown in closings in November. However, Yun expressed optimism for a turnaround due to the recent plunge in mortgage rates.
Home Foreclosures on the Upswing Nationwide
Around 1.13 million homes were available for sale at the end of November, down 1.7% from the previous month but up 0.9% from the same time last year. This decline in inventory contributed to an increase in prices. The median price of an existing home sold in October was approximately $387,600, marking a 4% increase from the previous year. Yun noted that home prices continue to rise and emphasized that only a significant increase in supply will dampen price appreciation.
Shorter Time on the Market, But Supply Crunch Persists
In November, homes sold on average in just 25 days. While this is a slight decrease from the 14 days recorded in July 2022, it represents a significant increase compared to previous years. Prior to the COVID-19 pandemic, homes typically remained on the market for about a month before being sold.
The current pace of sales indicates that it would take approximately 3.5 months to exhaust the inventory of existing homes. However, experts consider a pace of six to seven months as a healthy level. The shortage of supply is primarily driven by the substantial rise in mortgage rates over the past year. Homeowners who secured low mortgage rates before the pandemic are hesitant to sell their properties with rates currently high, leaving limited options for potential buyers.
Mortgage Rates Retreat, but Limited Impact on Listings
Over the past month, borrowing costs have declined as many investors believe that the Federal Reserve has concluded its aggressive interest-rate hike campaign. The current rates on the popular 30-year fixed mortgage hover around 6.95%, according to Freddie Mac. This is a decrease from the end of October’s high of 7.79%, but still significantly higher than the pre-pandemic average of 3.9%. Despite the retreat in rates, experts do not expect a substantial increase in home listings until the second half of 2024.
Overall, the rebound in existing home sales in November is a positive sign for the U.S. housing market. The easing mortgage rates have attracted buyers back into the market, but the supply crunch persists due to the reluctance of sellers to list their homes at current high rates. The hope is that as rates continue to retreat, more inventory will become available, creating a healthier balance in the market.