Existing home sales fell 7.7% in November compared to October, according to the National Association of Realtors.
The seasonally adjusted pace was 4.09 million units. This is weaker than the 4.17 million units housing analysts expected, and was a much deeper decline than the usual monthly declines.
Sales fell 35.4% year-over-year, marking the tenth consecutive month of decline. This was the weakest pace since November 2010, with the exception of May 2020, when sales fell sharply, albeit briefly, during the early days of the Covid pandemic. In November 2010, the nation was mired in a major recession as well as a foreclosure crisis.
The charges are based on closings, so the contracts were likely to be signed in September and October, when mortgage rates last peaked before falling a bit last month. Prices are now about one percentage point lower than they were at the end of October, but still a little more than double what they were at the beginning of this year.
“Essentially, the residential real estate market froze in November, similar to the sales activity seen during the Covid-19 economic shutdowns in 2020,” said Lawrence Yoon, chief economist at NAR. “The main factor has been the rapid increase in mortgage rates, which has hurt housing affordability and reduced incentives for homeowners to list their homes. In addition, the available housing stock remains near historic lows.”
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At the end of November, there were 1.14 million homes for sale, which is a 2.7% increase from November of last year, but at the current sales rate, it’s a 3.3-month low offer.
Declining supply has kept prices higher than a year ago, up 3.5% to an average selling price of $370,700, but those year-to-date gains are shrinking fast, far from the double-digit gains seen earlier this year. That’s still the highest November price Realtors have ever recorded, and at 129 consecutive months, it’s the longest streak of year-over-year price gains since realtors began tracking it in 1968. Roughly 23% of homes sold Above is the price list due to lack of supply.
“We’ve seen home prices fall from their summer peaks over the past five months. At the same time, we’ve also seen rental growth slow for 10 straight months,” Georges Ratiu, chief economist at Realtor.com, wrote in a statement. “However, the cost of real estate remains a challenge for many families looking for a place to call home, especially as high inflation and persistently high interest rates have eroded purchasing power.”
Sales are down in all regions but are down most in the West, where prices are the highest, down nearly 46% from a year ago.
Homes stayed on the market longer in November, averaging 24 days, up from 21 days in October and 18 days in November 2021. Despite the market slowdown, 61% of homes entered contracts in less than a month.
With prices still rising and mortgage rates hitting cyclical peaks, first-time buyers have been staying on the sidelines. They were responsible for 28% of sales in November, which is unchanged from October, and up slightly from 26% in November 2021. Historically, first-time buyers have made up about 40% of the market. A separate survey of brokers put the annual stake at 26%, the lowest since they began tracking.
Sales fell across all price categories, but saw the biggest drop in the $1 million-plus luxury segment, down 41% year-over-year. This sector saw the biggest gains in the early years of the pandemic.
Mortgage rates have retreated from their recent highs, but it remains to be seen if they will be enough to offset higher rates.
“The market may be melting since mortgage rates have been declining for five straight weeks,” Yoon added. “Average monthly mortgage payments are now nearly $200 lower than they were several weeks ago when interest rates peaked for the year.”
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