Sales of existing homes fell for the first time in 5 months in November

After five consecutive months of profit, closed sales of existing homes fell in November.

According to the National Association of Realtors, they fell 2.5% on a monthly basis to a seasonally adjusted annualized rate of 6.69 million units. Sales were a strong 25.8% higher year on year.

While the demand for housing is still high, fueled in part by the stay-at-home culture of the coronavirus pandemic, the supply is incredibly low. That harms both sales and affordability.

“This latest drop may be due to house prices rising at a tremendous rate. It could also be that job creation has stalled in recent months, eroding consumer confidence,” said Lawrence Yun, the association’s chief economist. “Not an alarm or worry about the last monthly drop.”

At the end of November, only 1.28 million homes were still for sale. That’s 22% lower than a year ago and represents 2.3 months of inventory at the current sales rate. That’s the lowest stock count since the brokers started tracking this stat in 1982. The number of new offerings is actually up about 10% since November 2019, but demand is sucking up that supply quickly.

Homes sold at the fastest rate ever, with an average of only 21 days on the market. Last year, houses were sold in 38 days, which was also considered fast.

Due to the growing imbalance between supply and demand, house prices rose faster than what could be healthy for the market. The median price of an existing home sold in November was $ 310,800, a 14.6% increase from November 2019.

This measure of the median price is an indication of where sales are most active, namely at the top end of the market. Sales of homes priced under $ 100,000 were down 22% from a year ago. Those priced from $ 100,000 to $ 250,000 were up just 2%. Sales at the top end of the market, priced between $ 750,000 and $ 1 million, were 85% higher than a year ago.

Low mortgage rates help to fuel demand at any price point. The average interest rate on the 30-year fixed mortgage was just over 3% for much of October, but then dropped to 2% in November, hovering around record lows for most of the month. That gave buyers more purchasing power, but also added warmth to the already overheated house prices.

Sales of new-build homes in October, measured by signed contracts, were 41.5% higher than in October 2019, according to the US Census. Builders are benefiting from the shortage of existing owner-occupied homes, but are struggling to keep up with demand.

Although December marks the traditionally slower housing season, buyers ‘foot traffic, as measured by real estate agents’ safes on the front doors of homes for sale, was 16% higher than a year ago.

The National Association of Realtors now predicts total home sales to total about 5.7 million by 2020, the highest level in 14 years.

“Conditions are far from back to pre-pandemic normal,” said Yun. “However, with the latest stimulus package and with vaccine distribution underway and very strong demand for home ownership still prevailing, robust growth is imminent for 2021.”