Mixed signals about the state of the housing market

November home sales and housing starts go in different directions

Mixed signals about the state of the housing market

November home sales and housing starts go in different directions
CONCEPT Key unlocking door to new home

Existing home sales showed continued strength in November, rising 4.8% from the previous month to a seasonally adjusted annual rate of 4.15 million units, according to the National Association of Realtors (NAR). November’s rate was the fastest pace since March when the annual rate reached 4.22 million.

Total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, were up 6.1% year over year from October’s anemic rate of 3.91 million units.

Total housing inventory reached 1.33 million units at the end of November, down 2.9% from October, but up 17.7% from a year ago. Unsold inventory sits at a 3.8-month supply at the current sales pace, down from October’s level of 4.2 months of supply, but still up from the same time last year’s level of 3.5 months.

The NAR reports that the median existing home price for all housing types in November was $406,100, up 4.7% from one year ago, when the median price was $387,800. All four U.S. regions posted price increases.

“Home sales momentum is building,” said NAR chief economist Lawrence Yun. “More buyers have entered the market as the economy continues to add jobs, housing inventory grows compared to a year ago, and consumers get used to a new normal of mortgage rates between 6% and 7%.”

While home sales jumped last month, construction of new housing slowed. November’s overall housing starts decreased 1.8% to a seasonally adjusted annual rate of 1.29 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S Census Bureau. The 1.29 million units refers to the number of housing units builders would begin if development kept this pace for the next 12 months.

Single-family starts increased 6.4% to an annual rate of 1.01 million homes. On a year-to-date basis, single-family construction is up 7.2%. The multifamily sector continues to be experiencing a major pullback after its strong buildup in recent years. Construction of apartment buildings and condominiums was down 23.2% from the previous month to an annualized pace of 278,000 units.

The National Association of Home Builders reported earlier this week that while single-family starts were up in November, single-family permits were flat as builders face mixed market conditions that include elevated mortgage rates. For 2025, the association is forecasting single-family starts to increase slightly as financing conditions modestly improve. The construction decline in the multifamily sector should end in the second half of next year.

Those plans, however, could be derailed after the Federal Reserve’s disappointing announcement on Wednesday that there may be only two rate cuts next year as the Fed takes a more cautious approach to fighting inflation and protecting the job market. Mortgage rates are expected to jump as the 10-year Treasury yield has risen from 4.31% on Dec. 13 to more than 4.55% during trading on Dec. 19.  

Despite the stronger existing home sales, recent estimates for housing starts and home sales show that the industry remains in a slump. As long as mortgage rates remain elevated and affordability is a challenge, it will be difficult for the industry to overcome its current doldrums.

“The seasonally adjusted annualized pace of existing home sales in 2024 has remained below 4 million for five consecutive months, a statistical feat unmatched since the late 1990s,” wrote Odeta Kushi, the deputy economist for First American Financial Corporation, in a recent report. “Put another way, the resale housing market hasn’t been this stagnant since Bill Clinton was president. Existing home sales have struggled under the weight of higher mortgage rates and corresponding affordability challenges, coupled with a limited supply of homes for sale. For most potential buyers during this period, even if you find a home for sale, chances are you can’t afford it. However, November data brings some cautiously optimistic news.”

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