U.S. existing home sales slowed for the tenth straight month in November as rising mortgage rates, surging inflation and steep home prices sapped consumer demand from the housing market.
Sales of previously owned homes tumbled 7.7% in November from the prior month to an annual rate of 4.09 million units, according to new data released Wednesday by the National Association of Realtors (NAR). That is worse than what economists were expecting, according to Refinitiv, and it marks a sharper monthly decline than usual.
On an annual basis, home sales plunged 35.4% in November.
“In essence, the residential real estate market was frozen in November, resembling the sales activity seen during the Covid-19 economic lockdowns in 2020,” said Lawrence Yun, the chief economist at NAR. “The principal factor was the rapid increase in mortgage rates, which hurt housing affordability and reduced incentives for homeowners to list their homes.”
INFLATION EASES MORE THAN EXPECTED IN NOVEMBER TO 7.1%, BUT CONSUMER PRICES REMAIN ELEVATED
There were about 1.14 million homes for sale at the end of November, according to the report, a decline of 6.6% from October but up about 2.7% from one year ago. Homes sold on average in just 24 days, up from 21 days in October and 18 days one year ago. Before the pandemic, homes typically sat on the market for about a month before being sold.
At the current pace of sales, it would take roughly 3.3 months to exhaust the inventory of existing homes. Experts view a pace of six to seven months as a healthy level.
The interest rate-sensitive housing market has borne the brunt of the Federal Reserve’s aggressive campaign to tighten policy and slow the economy.
Policymakers already lifted the benchmark federal funds rate seven consecutive times — including four 75-basis-point increases in June, July, September and November — and have indicated they plan to continue raising rates higher in 2023 as they try to crush inflation that is still abnormally high.
The average rate for a 30-year fixed mortgage fell to 6.31% last week, according to recent data from mortgage lender Freddie Mac. While that is significantly higher than just one year ago when rates stood at 3.12%, it’s down from a peak of 7.08% notched in November.
But even with higher interest rates putting homeownership out of reach for millions of Americans, prices are still steeper than just one year ago. The median price of an existing home sold in November was $370,700, a 3.5% increase from the same time a year ago. This marks the 129th consecutive month of year-over-year home price increases, the longest-running streak on record.
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However, prices did decline slightly from the high of $413,800 recorded in June, part of a usual trend of prices declining after peaking in the early summer.