What's Happening?
Sales of previously occupied U.S. homes increased by 0.5% in November compared to October, reaching a seasonally adjusted annual rate of 4.13 million units, according to the National Association of Realtors.
However, this figure represents a 1% decline from November of the previous year. The national median sales price for homes rose by 1.2% from a year earlier to $409,200, marking the 29th consecutive month of annual price increases. Despite the rise in sales, the housing market continues to struggle with a slump that began in 2022 due to rising mortgage rates. The average rate on a 30-year mortgage fell to 6.17% at the end of October, the lowest in over a year, providing some relief to the market. However, affordability remains a significant challenge, particularly for first-time buyers, who accounted for only 30% of home sales last month.
Why It's Important?
The ongoing challenges in the U.S. housing market have significant implications for the economy and potential homebuyers. Rising home prices and mortgage rates have made homeownership less accessible, particularly for first-time buyers who lack equity from previous homes. This situation could exacerbate wealth inequality, as homeownership is a primary means of building wealth for many Americans. The decline in home sales also affects related industries, such as construction and real estate services, potentially impacting employment and economic growth. The shortage of affordable homes continues to be a barrier, with inventory levels remaining below pre-pandemic norms. This imbalance between supply and demand could lead to further price increases, making it even harder for new buyers to enter the market.
What's Next?
Looking ahead, the National Association of Realtors forecasts a 14% increase in existing home sales next year, although this is more optimistic than other economists' predictions, which range from a 1.7% to 9% increase. The average rate on a 30-year mortgage is expected to remain slightly above 6% next year, which could continue to challenge affordability. The market's trajectory will depend on various factors, including economic conditions, job market stability, and potential changes in interest rates. Policymakers and industry stakeholders may need to address the supply shortage and affordability issues to stabilize the housing market and support potential buyers.
