US existing-home sales rise as buyers accept high mortgage rates

EXISTING-HOME sales in the US topped a rate of four million in November for the first time in six months as house hunters begrudgingly accept mortgage rates above 6 per cent.

Contract closings rose 4.8 per cent to an annualised rate of 4.15 million in November, the most since March, data released on Thursday (Dec 19) by the National Association of Realtors (NAR) showed. That beat the median estimate of economists surveyed by Bloomberg, who expected a rate of 4.09 million.

“Home sales momentum is building,” NAR chief economist Lawrence Yun said. While mortgage rates are still elevated, consumers are getting more comfortable with the current level and job creation is strong, he said.

November’s improvement aside, the market for previously owned homes has been stagnant with annual sales hovering around four million homes for the past two years, a ho-hum level that’s just three-quarters of the pre-pandemic trend. That’s been due in part to a historic shortage of homes for sale as owners refuse to list their properties and give up their existing 3 per cent mortgage rates, which in turn has driven up prices.

Yun said annual home sales are on pace to come in even lower than last year, which was the worst since 1995.

Slowly but surely, inventories have started rising this year as sellers come to terms with today’s high borrowing costs. While supply slipped last month from October – which Yun said is typical for this time of year – it was still notably higher than last November.

Robert Frick, corporate economist with Navy Federal Credit Union, said: “As we plunge into winter, the long-awaited thaw in the existing home market has finally begun. Rising inventories and pent-up demand have nudged buyers off the sidelines, though high prices and relatively high mortgage rates will keep a ceiling on sales.”

Affordability challenge

Affordability remains a major hangup. The median sale price of a previously owned home increased 4.7 per cent from a year earlier to US$406,100 last month, a record for the month of November. And while the Federal Reserve has lowered its benchmark interest rate by a full percentage point since September, mortgage rates remain twice their level from year-end 2021 and are expected to stay above 6 per cent for at least another two years, said the Mortgage Bankers Association (MBA).

Home financing costs for a 30-year fixed-rate contract were 6.75 per cent in the week ended Dec 13, per MBA data. Treasury yields – which influence mortgage rates – spiked on Wednesday after the Fed’s final meeting of 2024, in which central bankers forecast fewer rate cuts next year. Speaking after the decision, Fed chair Jerome Powell said activity in the housing sector has been weak. He also said housing inflation is cooling, but slower than hoped.

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In November, 53 per cent of homes sold were on the market after less than a month, compared with 59 per cent in October, while 18 per cent sold for above the list price. Properties stayed on the market for 32 days on average, compared with 29 days in the previous month. Existing-home sales account for the majority of the US total and are calculated when a contract closes. The government will release figures on new home sales on Tuesday. BLOOMBERG