Existing home sales fell 7.7% in November from October, according to the National Association of Realtors.
The seasonally adjusted year-over-year pace was 4.09 million units. That’s weaker than the 4.17 million homes analysts had predicted, and it was a much deeper drop than usual monthly declines.
Sales fell 35.4% year over year, the tenth consecutive month of declines. That was the slowest 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 country was in a major recession and a foreclosure crisis.
These counts are based on closings, so the contracts were probably signed in September and October, when mortgage rates last peaked before falling slightly last month. Rates are now about a percentage point lower than at the end of October, but still slightly more than double from the beginning of this year.
“Essentially, the residential real estate market was frozen in November, resembling sales activity during the 2020 Covid-19 economic lockdowns,” said Lawrence Yun, chief economist at NAR. “The main factor was the rapid rise in mortgage rates, which hurt housing affordability and reduced incentive for homeowners to list their homes. In addition, the available housing stock remains near historic lows.”
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There were 1.14 million homes for sale at the end of November, an increase of 2.7% compared to November last year, but at the current rate of sales, it represents a still low supply in 3.3 months.
Low supply kept prices higher than a year ago, up 3.5% to a median sales price of $370,700, but those annual gains are dwindling fast, a far cry from double-digit gains earlier this year. It’s still the highest November price the brokers have ever recorded, and at 129 consecutive months, it’s the longest running streak of year-over-year price increases since the brokers started tracking it in 1968. About 23% of homes are above list price due to tight supply.
“We have seen home prices decline from their summer peaks over the past five months. At the same time, we have also seen rental growth decline for 10 consecutive months,” George Ratiu, senior economist at Realtor.com, wrote in a release. “However, the cost of real estate remains a challenge for many households looking for a place to call home, especially as high inflation and still-raised interest rates have eroded purchasing power.”
Sales fell in all regions, but fell most in the West, where prices are the highest, almost 46% lower than a year ago.
Houses were on the market for longer in November, an average of 24 days, compared to 21 days in October and 18 days in November 2021. Despite the slower market, 61% of houses were under contract in less than a month.
With prices still high and mortgage rates reaching a cyclical high, first-time buyers have been sidelined. They accounted for 28% of sales in November, which was unchanged from October, and slightly up from 26% in November 2021. Historically, start-ups make up about 40% of the market. A separate survey of the brokers estimated the annual share at 26%, the lowest since they started tracking.
Sales fell across all price points, but took the sharpest plunge in the over-million dollar category, down 41% year-over-year. That sector had made the biggest gains in the first years of the pandemic.
Mortgage rates have come off their recent highs, but it remains to be seen whether it will be enough to offset higher prices.
“The market may be thawing as mortgage rates have fallen for five straight weeks,” Yun added. “The average monthly mortgage payment is now nearly $200 less than it was a few weeks ago, when interest rates hit their highs for this year.”