As borrowers battled declining inventory and rising prices, November sales of existing U.S. homes fell to their lowest level in almost two years, according to the National Association of Realtors.
Total existing home sales dropped 10.5 percent to a seasonally adjusted annual rate of 4.76 million in November, down from 5.32 million the month before. Sales have not seen a pace that slow since April 2014. This is the first time in 14 months that sales have actually decreased on a year-over-year basis, falling 3.8 percent from November 2014.
The sharp decline was tricky for NAR experts to explain. “Sparse inventory and affordability issues continue to impede a large pool of buyers’ ability to buy, which is holding back sales,” said NAR chief economist Lawrence Yun. “However, signed contracts have remained mostly steady in recent months, and properties sold faster in November. Therefore it’s highly possible the stark sales decline wasn’t because of sudden, withering demand.”
Home prices saw growth, however, on both a monthly and yearly basis. The national median moved up to $220,300, from October’s $219,100 and $207,200 in November 2014.Prices have now increased on a year-over-year basis for 45 straight months.
Meanwhile existing-home inventory fell 3.3 percent from October to 2.04 million, and down 1.9 percent from the year before. At the current sales rate, there is a 5.1-month supply of inventory below the 6-month level that Realtors considered to represent a balanced market between buyers and sellers.
During the same time, mortgage interest rates rose higher, according to data from Freddie Mac. The average rate on a 30-year conventional, fixed-rate mortgage grew to 3.94 percent in November, up from 3.80 percent a month earlier.
“The Federal Reserve’s decision this month to raise short-term rates is the first of many increases over the next couple of years,” Yun said. “Although this first move will likely have minimal impact on mortgage rates, additional hikes will push borrowing costs to around 4.50 percent by the end of next year. With home prices expected to continue rising, wages and new home construction need to start increasing substantially to preserve affordability.”
There were also more distressed sales on the market in November. Sales of foreclosures and short sales jumped to 9 percent, up from October’s 6 percent but were unchanged from last year.