Home sales inched slightly higher in November even as prices continued to climb and buyers paid mortgage rates that were at their highest levels of the year, according to a monthly report released Wednesday by the National Association of Realtors.
But sales were still weak, even though closed deals of existing homes — which include single-family homes, townhomes, condominiums and co-ops — beat expectations. Sales of existing homes rose 0.8% in November to a seasonally adjusted annualized rate of 3.82 million units, finishing a five-month slide.
Compared to a year ago, when sales were at a 4.12 million pace, sales were down 7.3%.
The November figures are reflective of activity in October before the recent decline in mortgage rates, said Lawrence Yun, NAR’s chief economist, in a statement. “A marked turn can be expected as mortgage rates have plunged in recent weeks,” he said.
Elevated prices, together with the average rate for a 30-year fixed rate mortgage nearing 8% in October, have created the least affordable market in several decades.
The median price for existing homes sold last month was $387,600 — a record high for the month of November — which was up 4% from a year ago and marked the fifth consecutive month of year-over-year price increases.
“Home prices keep marching higher,” Yun added. “Only a dramatic rise in supply will dampen price appreciation.”
As an indication of how much prices have grown over a relatively short amount of time, look at the median price during the last November before the pandemic in 2019 and compare it to last month’s median price. In the Northeast prices have risen 42% during that time, in the Midwest prices are up 35%, in the South they are up 50%, and in the West prices have climbed 47%.
Of the homes sold in November, 19% went for over the listing price, a smaller share than last month or last year, which suggests competition resulting in bidding wars among would-be buyers is easing a bit.
Properties typically remained on the market for 25 days in November, up from 23 days in October and 24 days in November 2022. Anything under 30 days, is generally considered a swift market.
Home sales were down in lower-priced categories – under $750,000 – due to lack of inventory and sales grew in higher-priced categories where there was more inventory. The high-end categories also saw more concessions in prices last month, Yun said.
“There is simply not enough inventory,” said Yun.
The supply of homes for sale at the end of November was 1.13 million units, down 1.7% from October but up 0.9% from one year ago.
First time home buyers return, as well as investors
In November first-time buyers were responsible for 31% of sales, up from 28% in October and in November 2022.
All-cash sales accounted for 27% of transactions in November, down from 29% in October, but up from 26% in November 2022.
Individual investors or second-home buyers, a large proportion of cash sales, purchased 18% of homes sold in November, up from 15% in October and 14% one year ago.
As mortgage rates come down more sellers are likely to emerge, boosting inventory and allowing for more sales, said Hannah Jones, Realtor.com’s senior economic research analyst. She said the typical mortgage held by homeowners in the third quarter of 2023 is 3.7%, that’s more than three percentage points lower than the prevailing rate for new mortgage originations during the same time.
“Though sellers won’t necessarily hold off until mortgage rates fall to their current loan’s level, the smaller the gap between the two, the more likely a homeowner chooses to sell,” Jones said.
Mortgage rates reached a 23-year high 7.79% at the end of October. Since then the average rate for a 30-year, fixed-rate loan has fallen to 6.95%, according to Freddie Mac. Analysts expect, as the Fed has signaled it would cut rates in the new year, that mortgage rates will continue to come down slowly in the new year, which generally boosts sales.
“Home sales always respond to a lower mortgage rate,” said Yun.
He added that he expects the sales numbers for October and November to be the cyclical low point, perhaps with one more month of similar low levels before sales climb again.
