Following what were five consecutive months of growth, existing home sales declined by 2.5% in November, as low supply and soaring prices pushed many would-be homeowners out of the market.
According to latest data released by the National Association of Realtors (NAR), existing home sales fell by 2.5% from October to an annualized rate of 6.69 million units, but still remained 25.8% higher compared to November 2019. Although the demand for housing across the US still remains high given the increasing significance of more spacious housing amid a stay-at-home normality amid the pandemic, supply has been substantially low. As a result, both sales and affordability are being impacted.
NAR chief economist Lawrence Yun notes that the latest decline in existing housing sales is likely due to exceptionally high prices, which have been skyrocketing since the onset of the pandemic. Moreover, the reduced pace of job creation heading into the fall and winter season also took a toll on consumer confidence, and as a result some individuals elected to forego purchasing a home.
Nonetheless, there were a total of 1.28 million existing homes on the market in November, which is still a decline of 22% from the year prior and amounts to a 2.3-month supply given the current pace of sales. According to NAR, this is the lowest inventory count on records dating back to 1982, as homes were being sold at the fastest pace ever – spending only 21 days on average on the market. In comparison, November 2019 saw existing homes spend 38 days on the market, which at the time was already considered a steady pace.
As a result of the increasing distortion between demand and supply, prices have been on a skyrocketing trajectory, which according to some analysts, might even be unhealthy for the market. The median price for an existing home increased by 14.6% on a year-over-year basis to $310,800 in November. However, the median price also suggests where on the spectrum of home prices sales are most active, which in this case has been on the higher end of the market.
Sales of homes below the $100,000 threshold declined by 22% since November 2019, while homes in the $100,000 to $250,000 range increased by less than 2%. However, homes priced in the $750,000 to $1 million category rose by a staggering 85% from the year prior. In the meantime, historically low mortgage rates that have been present amid the pandemic have been fueling a significant portion of the demand at each price point. The 30-year fixed mortgage rate fell from 3% to 2% in November, and although they gave buyers more purchasing power, they also added increased pressure on home prices.
Information for this briefing was found via NAR. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.