A new report from the National Association of Realtors (NAR) showed that total existing home sales in America, which account for a much larger portion of the overall U.S. housing market than new home sales (due out this Friday), rose by 0.7 percent in November to a seasonally adjusted annual rate of 5.61 million units. That was much better than economists had expected and the fastest pace of growth recorded since February 2007 (pre-recession). Regionally, home sales in November rose in the Northeast (+8.0 percent) and the South (+1.4 percent) but fell in the Midwest (-2.2 percent) and the West (-1.6 percent). Total housing inventory plunged by 8.0 percent to 1.85 million existing homes available for sale in November, and months’ supply slid to 4.0 at the current sales pace. The median selling price was $234,900 in November, a 6.8 percent gain compared to this same period last year and therefore the 57th consecutive month of annual growth. Most of the sales gains over the past year have been concentrated in the expensive end of the market.
The October headline gain was revised slightly lower but total contract closings are still up 15.4 percent on a year-over-year basis, one of the best readings of the recovery, albeit somewhat distorted by 2015 changes in mortgage regulations that delayed closings. Regardless, this latest report suggests that overall housing demand has so far held up in the face of higher selling prices and rising mortgage rates, something which is supported by recent application data. Going forward, though, increased household formation among aging Millennials will put additional strain on supply and in turn put more upward pressure on prices. Add to this a continued uptrend in mortgage rates and homeownership could become less affordable without an accompanying rise in wages. NAR chief economist Lawrence Yun added that “Existing housing supply at the beginning of the year was inadequate and is now even worse heading into 2017. Rental units are also seeing this shortage. As a result, both home prices and rents continue to far outstrip incomes in much of the country.”
Sources: Econoday, Bloomberg, Twitter, ZH, NAR, Calculated Risk, FRBSLPost author: Charles Couch