U.S. existing home sales rebounded in November from the lowest level in 13 years as easing mortgage rates lured would-be homebuyers back into the market.
Sales of previously owned homes rose 0.8% in November from the previous month to an annual rate of 3.82 million units, snapping a five-month losing streak, according to new data released Wednesday by the National Association of Realtors (NAR). It marked the slowest pace of sales since August 2010.
On an annual basis, existing home sales remain down 7.3% when compared with November 2022.
"The latest weakness in existing home sales still reflects the buyer bidding process in most of October when mortgage rates were at a two-decade high before the actual closings in November," said Lawrence Yun, NAR’s chief economist. "A marked turn can be expected as mortgage rates have plunged in recent weeks."
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There were about 1.13 million homes for sale at the end of November, according to the report, down 1.7% from the previous month but up 0.9% from the same time one year ago.
The decline in inventory helped to drive prices higher last month. The median price of an existing home sold in October was about $387,600 – up 4% from one year ago.
"Home prices keep marching higher," Yun said. "Only a dramatic rise in supply will dampen price appreciation."
Homes sold on average in just 25 days last month. While that is down slightly from the 14 days recorded in July 2022, it marks a major increase from prior years. Before the COVID-19 pandemic, homes typically sat on the market for about a month before being sold.
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At the current pace of sales, it would take roughly 3.5 months to exhaust the inventory of existing homes. Experts view a pace of six to seven months as a healthy level.
The supply crunch is largely being driven by the astronomical rise in mortgage rates over the past year. Sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell with rates so high, leaving few options for eager would-be buyers.
However, borrowing costs have retreated over the past month as many investors believe the Federal Reserve is done with its aggressive interest-rate hike campaign.
Rates on the popular 30-year fixed mortgage are currently hovering around 6.95%, according to Freddie Mac, down from a high of 7.79% at the end of October but well above the pre-pandemic average of 3.9%.
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"Rates have retreated some since mid-November, but they are likely still not at a level which will result in a significant increase in home listings," said Daniel Vielhaber, Nationwide economist. "We don’t expect to see that until the second half of 2024."
