In a noteworthy development, the National Association of Realtors (NAR) reported a significant uptick in the sales of previously owned homes, with a 4.8% increase in November compared to October. This surge brings the seasonally adjusted, annualized sales rate to approximately 4.15 million units. Notably, this level reflects a 6.1% rise from the figures reported in November 2022, marking the third-highest sales pace for the year and the most substantial annual increase in three years. As these figures are based on closing data, it is evident that the momentum for these transactions likely originated from contracts signed earlier in the fall, particularly in September and October.
An impactful aspect of this rise can be traced back to fluctuations in mortgage rates. In September, rates had dropped to an 18-month low, creating a favorable environment for buyers. However, the subsequent spike in rates during October might disrupt this momentum, posing questions about the sustainability of current sales trends. Lawrence Yun, the chief economist for NAR, suggests that a burgeoning job market and an increase in housing inventory are contributing to a healthier buying atmosphere, as consumers acclimatize to a new norm of mortgage rates hovering between 6% and 7%.
The supply metric presents a dual narrative. At the end of October, the inventory of homes for sale stood at 1.33 million units, reflecting a 17.7% increase from the previous year. This translates into a 3.8-month supply at the current sales pace—below the balanced threshold of six months, thus exerting ongoing pressure on home prices. The median home price climbed to $406,100 in November, with an annual increase of 4.7%. The pressure on prices is particularly pronounced in regions such as the Northeast and Midwest, where gains reached 9.9% and 7.3%, respectively, underscoring regional disparities in market performance.
Market Segmentation Trends
First-time homebuyers are gradually making a comeback, constituting 30% of sales in November, a modest increase from 27% in October but a slight decline compared to the previous year. Meanwhile, the cash buyers’ dominance remains evident, accounting for 25% of transactions. In stark contrast, investor activity has seen a notable downturn, comprising only 13% of the sales, down from 18% in November 2022. This raises intriguing questions about the current investor sentiment towards real estate, especially considering potential shifts in the rental market as rent prices stabilize.
Marquee trends also emerge within different price brackets. The most significant sales increases are occurring in the luxury market segment, with homes priced over $1 million experiencing a remarkable 24.5% surge compared to last year, while more affordable options under $100,000 saw a downturn of 24.1%. As mortgage rates continue their upward trajectory—recently surging an additional 21 basis points—market participants are left speculating about future Federal Reserve actions and their implications for home buying sentiment. Given the current economic indicators, a cautious approach may be warranted for both buyers and sellers navigating this evolving landscape.