Preowned home sales in November fell 7.7% from the previous month to a seasonally adjusted annualized rate of 4.09 million, the weakest rate since May 2020, the National Association of Realtors said on Wednesday. November sales fell 35.4% year-on-year. The streak of declines is the longest on record since 1999, NAR said.
Existing home sales are down about 37% since their last peak in January. Mortgage rates rose to over 7% in early November from 3.1% at the end of 2021. That increased expected mortgage payments by hundreds of dollars a month for many buyers and drove many buyers out of the market.
This year’s sharp slowdown in the housing market marks an important way for the US Federal Reserve’s aggressive rate hikes to spread through the economy. The central bank hiked interest rates seven times this year, including in November and last week, to combat high inflation by slowing spending, hiring and investment.
US consumer confidence rose sharply this month to its highest level since April on easing inflationary pressures and a resilient job market, the Conference Board, a private research group, said in a separate report on Wednesday. Its consumer confidence index rose to 108.3 in December from a revised 101.4 in November.
Early stock gains accelerated on Wednesday after the reports were released. The Dow Jones Industrial Average gained 1.6%, while the S&P 500 and Nasdaq Composite each gained 1.5%. The 10-year Treasury yield edged up, while the two-year yield fell.
Home prices have fallen from their spring highs in the US, and prices in some markets have fallen below last year’s levels. But nationally, prices are still higher than last year, mainly because the supply of homes for sale remains lower than normal.
The average existing home price rose 3.5% year over year in November to $370,700, NAR said. Prices fell month-on-month for the fifth straight month after hitting a record $413,800 in June.
“Today’s November selling activity is essentially close to the May 2020 lockup period,” said Lawrence Yun, NAR’s chief economist. “Today’s November sales figures clearly reflect this rapid rise in mortgage rates.”
Barring the early months of the Covid-19 pandemic, November’s existing home sales rate was the lowest since November 2010, Mr Yun said.
Anna and Gabriel Martinez, who live in an apartment in San Antonio, have been trying to buy a house in the area. They think the houses there are overpriced and worry about their job security if the economy hits a recession next year. They recently decided to stay in their apartment for another year.
“Even with our income and our down payment, it’s just not safe for us right now, or at least that’s the perception,” said Mr. Martinez, who works as a risk analyst for a technology company. “Maybe by this time next year we’ll get a better view of where the market is [and] when it is okay to pull the trigger.”
Despite forecasts of a cooling housing market in 2022, US home prices are still reaching record highs, even as mortgage rates have risen sharply in recent months. WSJ’s Dion Rabouin explains what’s driving demand, signs of a slowdown on the horizon and what that could mean for the economy. Photocomposite: Ryan Trefes
Fed officials last week announced plans to raise interest rates further next year in a bid to reduce high inflation by slowing economic growth. The housing market slowdown is an important part of this process, as weaker home sales dampen associated spending such as renovations, furnishings and landscaping. US retail sales fell in November in stores selling furniture, home furnishings, electronics and appliances, building materials and gardening tools and supplies, the Commerce Department reported last week.
Homes are typically signed a month or two before the end of the contract, so November sales data largely reflects purchase decisions made in October and September.
There are early signs that demand has picked up slightly in recent weeks as mortgage rates slipped from their recent highs. The average interest rate on a 30-year fixed rate mortgage fell to 6.31% last week from more than 7% in early November, real estate finance agency Freddie Mac said on Thursday.
Mortgage applications for home purchases increased a seasonally adjusted 4% in the week ended December 9 from the previous week, according to the Mortgage Bankers Association. The seasonally adjusted measure of demand for home purchases by real estate brokerage firm Redfin Corp., which tracks buyer inquiries, rose 5% in the four weeks ended December 11 from the previous month.
But many buyers are waiting until spring to see if the inventory of homes for sale increases and if prices continue to fall, real estate agents say.
In some markets, prices are already falling year-on-year. The average selling price in Idaho’s Ada County, which includes Boise, fell 2.5% in November from a year earlier, according to Boise Regional Realtors. The median selling price in November fell 0.9% in the Phoenix area and was flat in the Austin, Texas area, according to local real estate groups.
The number of houses for sale has been increasing for a year because the houses have been on the market longer, but potential sellers are reluctant to list their houses. Many homeowners have mortgage rates below 4% and are unwilling to give up their current interest rate for a higher one on a new home.
The typical home sold in November was on the market for 24 days, up from 21 days the previous month, NAR said.
Nationwide, 1.14 million homes were for sale or under contract at the end of November, down 6.6% from October and up 2.7% from November 2021, NAR said. At the current sales pace there was a 3.3 month supply of homes on the market at the end of November.
Ilana Ben-Ezra and Mendel Zecher signed the purchase agreement for their first home in November.
Photo: Ilana Ben-Ezra
Higher interest rates didn’t deter Ilana Ben-Ezra and Mendel Zecher, who signed the contract to buy their first home in Boca Raton, Florida, last month. They agreed to pay $592,500 for a three-bedroom, one-office home, about 9% below list price.
“It evens out – interest rates go up and prices go down,” Mr. Zecher said. “I think that allowed us to find a decent deal.”
The proportion of first-time buyers in the market was 28% in November, up from 26% a year earlier. About 26% of existing home sales in November were purchased in cash, up from 24% in the same month a year ago, NAR said.
Existing home sales fell the most on a monthly basis, falling 12.5% in the west and 7.1% in the south.
Builders are incentivizing buyers and lowering prices in some markets in response to lower demand.
A measure of US homebuilder confidence fell in December for the 12th straight month to its lowest level since April 2020, the National Association of Home Builders said this week.
Housing starts, a measure of US housing construction, fell 0.5% in November from October, the Commerce Department said this week. Housing permits, which may be a determining factor for future housing construction, fell 11.2%.
News Corp, owner of the Journal, also operates Realtor.com under license from NAR.
Write to Nicole Friedman at [email protected]
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