A five-month streak of decreases in U.S. existing home sales was snapped in November when transactions rose moderately month over month, according to new figures from the National Association of Realtors (NAR).
Existing home sales came in at a seasonally adjusted annual rate of 3.82 million units, up 0.8% from October, but remained down 7.3% year over year, the NAR reported. November’s pace is still weak compared to historic norms: Consider that existing home sales have come at an annualized clip below 4 million units in only 12 months since 1999.
But the uptick in resales, however modest, is a potential light at the end of a long tunnel for the still-struggling real estate sector.
“The latest weakness in existing home sales still reflects the buyer bidding process in most of October when mortgage rates were at a two-decade high before the actual closings in November,” said Lawrence Yun, the NAR’s chief economist. “A marked turn can be expected as mortgage rates have plunged in recent weeks.”
The average interest rate on a 30-year fixed-rate mortgage has dropped below 7% for the first time since Aug. 10, according to Freddie Mac. Any downward shift is promising not only for buyers but also on the inventory side, where receding rates may coax homeowners to list their properties and add to historically low supply. A substantial majority of current homeowners carry mortgage rates below 5%, provoking the lock-in effect and keeping them on the sidelines rather than listing their homes only to buy a new property at a much higher rate.
Total housing inventory at the end of November was at 1.13 million units, up 0.9% year over year but down 1.7% from October. Unsold inventory sat at a supply of 3.5 months at the current sales pace, down from 3.6 months in October. And homes continue to sell fast — 62% of homes sold in November were on the market for less than a month.
Low inventory has kept home prices on a steady upward trajectory. The median existing home price in November was $387,600, up 4% annually.
With home prices still on the uptick, inventory will have to see considerable improvement before the market fully regains its footing. “Only a dramatic rise in supply will dampen price appreciation,” Yun said.
