Home sales rise at fastest pace since March – but market set for worst year since 1995

US pre-owned home sales rose in November at their fastest pace since March with home buyers encouraged by a wider selection of properties on the market, even as mortgage rates mostly rose.

Existing home sales rose 4.8% last month, from October, to a seasonally adjusted annual rate of 4.15 million, the National Association of Realtors said Thursday.

Sales accelerated 6.1% compared to November last year, representing the biggest year-over-year gain since June 2021.

Recent home sales came in at 4.1 million, the pace economists expected, according to FactSet.

House prices rose on an annualized basis for the 17th consecutive month.

The national median sales price increased 4.7% from a year ago, to $406,100.

Despite gains in November and October, home sales are still below last year’s pace, when they fell to a nearly 30-year low.

“It looks like we’re not going to match last year in terms of the annual total, so it’s going to be the lowest home sales since 1995,” said Lawrence Yun, NAR’s chief economist.

The US housing market has been in a sales slump since 2022, when mortgage rates began to rise from pandemic-era lows. A lack of homes for sale has helped boost prices, which as of last month were up 50% nationally since 2019.

Mortgage rates have fallen this year as the average rate on a 30-year home loan hit a 23-year high of nearly 8% in October 2023, but not enough to make a difference for many potential homebuyers .

The average rate eased to a two-year low of just over 6% in September after the Federal Reserve’s decision to cut its key interest rate for the first time in more than four years. But it has mostly grown since then. It was 6.6% last week, according to mortgage buyer Freddie Mac.

Home sales that closed last month likely reflect contracts signed in September and October, when mortgage rates were more attractive.

Heading into next year, the outlook for mortgage rates remains cloudy. Many economists predict that the average rate for a 30-year mortgage will ease next year, but will generally remain above 6%.

Mortgage rates are affected by several factors, including movements in the yield on the 10-year U.S. Treasury note, which lenders use as a guide to evaluate home loans. Bond yields rose on Wednesday after the Fed signaled it is likely to cut rates less next year than it predicted just months ago. While the central bank does not set mortgage rates, its actions and the trajectory of inflation affect movements in the 10-year Treasury yield.

Homebuyers who could afford to buy in November took advantage of a pickup in homes that are available. There were 1.33 million unsold homes at the end of last month, down 2.9% from October but up 17.7% from November last year, the NAR said.

That translates to a 3.8-month supply at the current sales pace, down from a 4.2-month pace at the end of October last year, but down from a 3.5-month pace in November last year. Traditionally, a 5-6 month supply is considered a balanced market between buyers and sellers.

“We are seeing increased sales because of this increase in inventory,” Yun said.

However, the supply of houses on the market remains about 30% below what it was before the pandemic.