U.S. News: Existing-Home Sales Rise After 5 Months of Declines

"Home sales ticked up from 13-year lows in November after five consecutive months of declines, even as mortgage rates near their highest levels in two decades continued to weigh on sales.

Existing-home sales, which make up most of the housing market, increased 0.8% in November from the prior month to a seasonally adjusted annual rate of 3.82 million, the National Association of Realtors said Wednesday. November sales fell 7.3% from a year earlier. Existing-home sales for the full year in 2023 are on track to be the lowest since at least 2011.

Homes typically go under contract a month or two before the contracts close, so the November data largely reflect purchase decisions made in September and October, when mortgage rates were climbing. Home-buying affordability fell in October to the worst level since 1985, according to NAR.

Affordability has improved slightly since then, as mortgage rates have declined for seven consecutive weeks and fell below 7% last week. That could spur more home-buying activity in early 2024, real-estate agents say.

"When interest rates decline, after a few months we see the rise in sales," said Lawrence Yun, NAR's chief economist. "This is the cyclical low point."

But the inventory of homes for sale remains unusually low, keeping home prices near record highs. Many homeowners with low mortgage rates are choosing to stay put, because it would be too expensive to buy a different house at a higher interest rate.

The national median existing-home price rose 4% in November from a year earlier to $387,600, NAR said. That was the highest price for any November in data going back to 1999, NAR said. Prices aren't adjusted for inflation.

The housing market's slowdown since the start of 2022 is due to the Federal Reserve's efforts to curb inflation and cool the economy by raising its benchmark interest rate. Last week, the Fed kept its benchmark rate steady at a 22-year high and released new projections showing Fed officials anticipated three rate cuts next year.

Kevin Maxwell and Bentley Olson Maxwell started house hunting in the Atlanta suburbs this fall after getting married. During the weeks they spent shopping, mortgage rates rose, making some of the houses at the top end of their budget unaffordable.

"Something that we could have done at 6.5% wouldn't be something that we could do at 6.875%," Kevin Maxwell said. The couple, who are expecting their first child in the spring, bought a four-bedroom house in Norcross, Ga., for $465,000 and moved in last month.

"We're super excited," Maxwell said. "If we waited another year, we just didn't know if the housing market would even improve."

Mortgage applications have increased in six of the past seven weeks as mortgage rates have declined, according to the Mortgage Bankers Association. The typical housing payment for a buyer purchasing a median-priced home with a 20% down payment in the four weeks ended Dec. 10 fell to the lowest level since April, according to real-estate brokerage Redfin.

But the low inventory of homes on the market is keeping prices high.

Nationally, there were 1.13 million homes for sale or under contract at the end of November, down 1.7% from October and up 0.9% from November 2022, NAR said. At the current sales pace, there was a 3.5-month supply of homes on the market at the end of November.

Dan Armstrong listed a five-bedroom house in Boston that he used as a rental property for sale in September for $619,000. Within a few days, he had accepted an offer for $630,000. The sale closed in October.

"I'm just surprised it went so fast," Armstrong said. "Because the interest rates are so high, I thought it might sit out there for a long time."

The typical home sold in November was on the market for 25 days, up from 24 days a year earlier, NAR said." [1]

1. U.S. News: Existing-Home Sales Rise After 5 Months of Declines. Friedman, Nicole.  Wall Street Journal, Eastern edition; New York, N.Y.. 21 Dec 2023: A.2.