Existing home sales recorded a slight increase last month, breaking five consecutive months of decline and foreshadowing what is expected to be a more favorable real estate market in 2024.
The National Association of REALTORS® reported Wednesday that completed existing home sales of single-family homes, townhomes, condos and co-ops rose 0.8% in November. Lawrence Yun, NAR's chief economist, said this number is likely to increase further in the coming months as borrowing costs fall. Mortgage rates averaged 6.95% last week, after reaching nearly 8% earlier this fall.
Still, existing home sales in November were down 7.3% from the same month last year, NAR reported. Home prices are still rising due to inventory shortages, putting pressure on buyers' budgets. Prices rose 4% in November compared to the same month last year, reaching a median price of $387,600. “Only if supply increases dramatically will price increases be contained,” Yun said.
More supply may be coming
Homebuyers continue to have limited options in the market, and many homeowners, locked in ultra-low mortgage rates in recent years, remain reluctant to sell. That has helped keep housing stock at historic lows. Total inventory in November decreased by 1.7% compared to the previous month, but increased by 0.9% compared to the same month last year.
With existing inventory so low, home builders are ramping up construction to attract more buyers. The Commerce Department said this week that single-family home construction increased 18% in November from the previous month and 42% from a year earlier. New home sales rose this year despite rising mortgage rates this fall. Yun said builders are offering more incentives, such as lower interest rates and offering co-op commissions to buyer agents.
“Lower interest rates and a lack of resale inventory led to a big boost in new home construction in November,” said Alicia Huey, president of the National Association of Home Builders. “And while these increases in starts are consistent with our latest builder survey, which shows rising builder sentiment and future sales expectations, home builders are also seeing rising construction and regulatory costs. I keep fighting.”
Still, home builders expect single-family starts to rise 4% in 2024, based on expectations that mortgage rates will fall in the new year and inflation will fall, said Robert, NAHB's chief economist. Dietz says.
“More housing construction will be needed because there is a continuing housing shortage in most markets,” Yun said. “An additional 30% increase in home construction could be easily absorbed by the market, especially given the sharp fall in mortgage rates in recent weeks.”
Resilient buyers are ready
Despite rising home prices and mortgage rates, bidding wars continue as consumers compete for the market's limited inventory. Homes are selling quickly, with 62% of properties sold in November having been on the market for less than a month, NAR reports. Usually, real estate remains on the market for 25 days in November.
First-time buyers are returning, accounting for 31% of existing home sales in November, up from 28% a year ago, according to NAR data. Additionally, more consumers are purchasing homes with cash, leveraging proceeds from previous home sales and avoiding higher mortgage rates altogether. In November, 27% of transactions were cash sales. Individual investors and second-home buyers tend to account for the largest portion of cash sales, accounting for 18% in November, up from 14% a year earlier, according to NAR data.
Home sales continue to be strong, especially in the South and Midwest. NAR identified several markets in the South and Midwest as having the most pent-up homebuyer demand heading into 2024. Topping the list of the top 10 markets to watch in 2024 were the Austin, Texas, and Dallas-Fort Worth metropolitan areas. Dayton, Ohio.and Durham – Chapel Hill, North Carolina
Take a closer look at existing home sales across the country in November, according to NAR's latest housing report.
- Northeast: Sales volume decreased by 2.1% compared to October, reaching an annual rate of 470,000 units. Home sales fell 13% year over year. Median price: $428,600, up 4.8% year over year.
- Midwest: Sales volume reached an annual rate of 940,000 units, an increase of 1.1% from the previous month. Existing home sales decreased by 8.7% from the previous year. Median price: $280,800, up 4.9% from November 2022.
- South: Unit sales increased by 4.7% from October, reaching an annual rate of 1.77 million units. Existing home sales decreased by 4.3% from the previous year. Median price: $351,500, up 3.4% from last year.
- West: Sales volume decreased by 7.2% from the previous month, reaching an annual rate of 640,000 units. Sales decreased by 8.6% compared to a year ago. Median price: $603,200, up 5.3% from November 2022.
