A National Association of Realtors report on Friday also showed that the inventory of previously owned homes fell to an eight-month low since October, limiting choices for those looking to buy. Although home supply typically declines at the start of winter, inventory growth has slowed on a year-over-year basis, likely in response to slower demand. But limited supply may prevent home prices from falling completely.
“Major headwinds remain for housing market activity,” said Oliver Allen, senior US economist at Pantheon Macroeconomics. “The recovery in the supply of existing homes for sale appears to have stalled over the past few months. The weak labor market will limit the number of households who are confident enough to move, and affordability measures remain stretched.”
Home sales rose 0.5% last month to a seasonally adjusted annual rate of 4.13 million units, the NAR said. Economists polled by Reuters had forecast that home resales would increase by 4.15 million units.
Sales rose 4.1% in the Northeast, which has a smaller share of the housing market. They rose 1.1% in the densely populated South, but fell 2.0% in the Midwest, considered the most affordable region. Sales in the West were unchanged.
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November home sales fell 1.0% on a year-over-year basis.
The rate on the popular 30-year fixed-rate mortgage fell from 7.04% in mid-January to 6.19% in late November, data from mortgage finance agency Freddie Mac showed. However, it did not improve further, averaging 6.21% this week. Mortgage rates track the benchmark 10-year US Treasury yield. Lower borrowing costs are being partially offset by a sluggish labor market, with the unemployment rate hitting a four-year high of 4.6% in November and annual wage growth running at its slowest pace since May 2021. With housing starts and new home sales reports – the government had a 3-4-3-4 days to go as recently as September. Shutdown – Economists said it was difficult to assess the housing market.
Residential investment, which includes homebuilding and sales through brokers’ commissions, has contracted in four of the past five quarters. The government is due to release preliminary estimates of third-quarter gross domestic product next Tuesday.
There is no meaningful turnaround in housing
“Current home sales figures suggest that the decline in mortgage rates in recent months has boosted demand slightly, but not enough to signal a meaningful turnaround,” said Stephen Stanley, chief US economist at Santander US Capital Markets.
Economic worries linked to the labor market and higher prices capped an improvement in consumer sentiment in December, a separate report showed. A University of Michigan survey of consumers said its consumer sentiment index rose to 52.9 this month from 51.0 in November. However, it was a downward revision from the previous preliminary estimate of 53.3.
“Despite some signs of improvement for the end of the year, sentiment remains about 30% below December 2024, as pocketbook issues continue to dominate consumer views of the economy,” said Joanne Hsu, director of Surveys of Consumers.
Stocks on Wall Street were trading higher. The dollar rose against a basket of currencies. US Treasury yields rose.
The inventory of existing homes fell 5.9% to 1.430 million units in November, the lowest level since March. Although inventories rose 7.5% from a year ago, the increase was modest after double-digit gains in previous months. At November’s sales pace, it would take 4.2 months to exhaust the current inventory of existing homes, up from 3.8 months a year earlier.
“If you don’t have a selection of homes to sell, you can’t sell homes,” said Carl Weinberg, chief economist at High Frequency Economics.
The median existing home price last month rose 1.2% from a year earlier to $409,200. The average number of days on market for a listed property has increased to 36 from 32 a year ago.
First-time buyers accounted for 30% of sales in November, unchanged from a year ago. Economists and realtors say a 40% share in this category is necessary for a strong housing market.
All-cash sales accounted for 27% of transactions, up from 25% a year ago. Distressed sales, including foreclosures, made up 2% of transactions, steady from a year ago.
“With the near-term outlook for housing remaining relatively stable, there is little reason to expect a sustained further shift in sales until mortgage rates fall meaningfully below current levels,” said Ben Ayers, senior economist at Nationwide.
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