Existing home sales boom in November
The pace of existing home sales was at its strongest in more than a decade in November, posting major gains from both the previous month and previous year. However, affordability continued to be a concern as the share of first-time buyers dwindled.
According to its latest report on existing home sales in the United States, the National Association of Realtors determined that the month's seasonally adjusted annual sales rate stood at 5.81 million. This was up 5.6 percent from October's upwardly revised figure of 5.5 million and 3.8 percent higher than November 2016. The annual sales pace was the highest since December 2006, when it stood at 6.42 million.
November's figure marks a resurgence from depressed sales over the summer. The National Association of Realtors says the lower sales were driven in part by a series of hurricanes to impact the South. The slowdown was enough to prompt the association's chief economist, Lawrence Yun, to downgrade the year's forecasted existing home sales to about 5.44 million.
Sales were up in all regions in November except the West, which still saw year-over-year gains. Yun said healthy economic trends, including job gains and growth in the stock market, has helped increase the demand for buying a home.
"As evidenced by a subdued level of first-time buyers and increased share of cash buyers, move-up buyers with considerable down payments and those with cash made up a bulk of the sales activity last month," said Yun. "The odds of closing on a home are much better at the upper end of the market, where inventory conditions continue to be markedly better."
The median price for an existing home sold during November was $248,000. This was up 5.8 percent from the previous year, and marked the 69th consecutive month of year-over-year price gains.
Single-family home sales were up 4.5 percent from the previous month and 3.2 percent from the previous year to a seasonally adjusted annual rate of 5.09 million sales. The median price for this type of home was $248,800, a year-over-year increase of 5.4 percent.
Condominium and co-op sales jumped 14.3 percent from October and 7.5 percent from November 2016 to a seasonally adjusted annual pace of 720,000. The median price for a condominium or co-op was $242,500, up 8.8 percent from the previous year.
The share of first-time homebuyers fell from 32 percent in both the previous month and previous year to 29 percent. Yun said this segment of buyers might be further pressured by an anticipated increase in mortgage rates next year. People buying their first home also tend to find a limited market, with November marking the 30th consecutive month of year-over-year inventory decreases. A total of 1.67 million homes were available for sale during the month, down 7.2 percent from October and 9.7 percent from November 2016.
"Price appreciation is too fast in a lot of markets right now," said Yun. "The increase in homebuilder optimism must translate to significantly more new construction in 2018 to help ease these acute inventory shortages."
According to Freddie Mac, the average commitment rate for a 30-year fixed rate conventional mortgage in November was 3.92 percent. This marked the second month in a row where the typical rate went up, although it only inched up from 3.9 percent in October. The average rate for 2016 as a whole was 3.65 percent.
Forty-four percent of homes sold in November found a buyer within a month. The average property was on the market for 40 days, six days slower than in October but three days faster than in November 2016.
Investor activity picked up slightly in November, with individual investors accounting for 14 percent of the months' sales. This was up from 13 percent in October but unchanged from the previous month.
All-cash sales, which are typically an indicator of investor purchases, made up 22 percent of existing home sales. This matched the highest share since May, increasing from 20 percent in the previous month and 21 percent in the previous year.
"The elevated presence of investors paying in cash continues to add a layer of frustration to the supply and affordability headwinds aspiring first-time buyers are experiencing," said Yun. "The healthy labor market and higher wage gains are expected to further strengthen buyer demand from young adults next year. Their prospects for becoming homeowners will only improve if more lower-priced and smaller-sized homes come onto the market."
For the fourth month in a row, distressed sales accounted for 4 percent of existing home sales. This share was down from 6 percent in November 2016. Three percent of the month's sales were foreclosures, while 1 percent were short sales.
The existing annual sales rate of 800,000 transactions in the Northeast was unchanged from the previous year, but up 6.7 percent from the previous year. The median existing home price in the region was $273,600, a 4 percent increase from November 2016.
The Midwest had the strongest growth in sales, with its annual rate of 1.42 million transactions increasing 8.4 percent from the previous month and 6.8 percent from the previous year. A median home in the region sold for $196,100, climbing 8.8 percent from the previous year.
In the South, existing home sales grew 8.3 percent from the previous month and 4 percent from the previous year to an annual rate of 2.34 million homes. Median home prices rose 4.8 percent from the previous year to $216,200.
The annual rate of 1.25 million sales in the West was down 2.3 percent from October, but up 2.5 percent from the previous year. The median home sold in the region went for $375,100, a year-over-year increase of 8.2 percent.
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