The housing market slump deepened in November, as sales of previously occupied US homes slowed for the 10th straight month, the longest period on record since 1999.
Existing home sales fell 7.7 percent last month from October to a seasonally adjusted annual rate of 4.09 million, the National Association of Realtors (NAR) said on Wednesday. That was a slower pace of sales than economists expected, according to FactSet.
Sales fell 35.4 percent from November of last year. Excluding the sharp drop in sales that occurred in May 2020 at the start of the pandemic, sales are now at the slowest annual pace since November 2010, when the housing market was hit by the aftermath of the foreclosure crisis. mortgages from the late 2000s.
Still, home prices continued to rise last month, albeit at a much slower rate than a few months ago. The national median home sales price rose 3.5 percent in November from a year earlier, to $370,700.
Nearly a quarter of the homes that sold last month sold above asking price, said Lawrence Yun, chief economist at the NAR.
“We have this weird market where there are fewer buyers and fewer transactions, but because of the limited supply there are still some multiple offerings happening and houses are still selling reasonably fast,” Yun said.
Mortgages on the rise
The November housing snapshot was the latest evidence of a deepening stagnation from what was a blistering pace of sales earlier in the year, when mortgage rates were hovering at record lows.
The average rate on a 30-year mortgage was just over 3 percent in early January. Last week, it was at 6.31 percent, more than double the average rate of 3.12 percent a year earlier, according to mortgage buyer Freddie Mac.
That increase can add hundreds of dollars to monthly mortgage payments and can also discourage homeowners who have locked in a much lower rate for the past few years from buying a new home.
Although they have declined in recent weeks, mortgage rates averaged 7.08 percent in early November.
Mortgage rates are likely to remain a major hurdle for some time as the Federal Reserve has consistently signaled its intention to continue raising rates in the near term in an attempt to squash the highest inflation in decades.
The federal funds rate was in a range of 4.25 percent to 4.5 percent, the highest level in 15 years. Fed policymakers have forecast the central bank rate to hit a range of 5 percent to 5.25 percent by the end of 2023.
While mortgage rates don’t necessarily reflect Federal Reserve rate increases, they do tend to track the yield of the 10-year Treasury note. Yield is influenced by a variety of factors, including future inflation expectations and global demand for US Treasuries.
Yun forecasts that the average rate on a 30-year mortgage may fall to about 5.5 percent by early to mid-next year. His justification: Increased apartment building construction should lead to lower rents, which will help reduce a key barometer of inflation. That could pave the way for the Fed to ease its drive to raise rates, which “should moderate mortgage rates.”
“And if that’s the case, I think the real estate market will see a steady rebound in terms of sales activity,” Yun said.
On average, homes sold in just 24 days since they hit the market last month, up from 21 days in October, the NAR said. That’s still a relatively rapid turnaround, since before the pandemic, homes typically sold more than 30 days after they were listed.
Home inventory on the market decreased for the fourth consecutive month. About 1.14 million homes were on the market at the end of November. That equates to a 3.3-month supply at current sales rates. In a more balanced market between buyers and sellers, there is a supply of five to six months.
The combination of higher mortgage rates and rising prices has kept many first-time homebuyers on the sidelines. They accounted for 28 percent of sales last month, unchanged from October, the NAR said. By historical standards, first-time buyers typically accounted for up to 40 percent or more of transactions.
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