In a noteworthy turn of events, the real estate market experienced a significant boost in the sales of previously owned homes in November, marking a 4.8% increase from October, according to the National Association of Realtors (NAR). The seasonally adjusted annualized rate for now stands at 4.15 million units, illustrating a robust 6.1% rise year over year. This uptick represents the third-highest sales pace of 2023 and the most substantial annual growth observed in three years. The data, which captures closings likely agreed upon during the previous months, suggests that the market is responding positively to recent economic shifts.
Lawrence Yun, the chief economist for NAR, attributes this upward momentum to several converging economic factors. As the labor market strengthens, with consistent job growth, more individuals are stepping into the housing market. Furthermore, the availability of housing inventory has seen a notable increase compared to the previous year. With consumers adapting to a “new normal” regarding mortgage rates—which fluctuate between 6% and 7%—there seems to be growing confidence among potential buyers.
As of October, the housing supply reached 1.33 million units, reflecting a 17.7% increase year-over-year. This translates to a 3.8-month supply at the current sales rate, below the benchmark of a six-month supply that typically indicates a balanced market. This ongoing tightness in inventory is exerting upward pressure on home prices.
In November, the median price for homes climbed to $406,100, showcasing a year-over-year increase of 4.7%. This rise aligns with previous months, as prices were also up 4% annually in October. Notably, the strongest price advancements were recorded in the Northeast and Midwest regions, which saw increases of 9.9% and 7.3%, respectively. Interestingly, approximately 18% of homes sold for above the list price, indicating competitive bidding scenarios.
As the market evolves, first-time homebuyers are regaining some presence, contributing to 30% of November’s sales—a rise from October’s 27%. However, this figure still lags behind prior year levels. The market also exhibits a substantial portion of cash transactions, accounting for 25% of total sales. Interestingly, the share of investor purchases has dipped to 13%, down from 18% a year earlier, prompting questions about whether the current home prices have reached their peak or if changes in rent dynamics play a role.
One of the striking observations is the surge in sales within the upper-end segment of the market. Homes priced over $1 million saw an impressive 24.5% increase in sales compared to November of the previous year, while homes under $100,000 experienced a sharp decline of 24.1%. This trend showcases a shifting demographic preference towards higher-end properties, potentially influenced by the ongoing economic recovery.
Meanwhile, mortgage rates have once again taken a turn, with the average rate for a 30-year fixed mortgage increasing by 21 basis points following the latest Federal Reserve meeting. The anticipation of fewer rate cuts next year introduces an element of uncertainty in the market landscape. As prices rise and inventories fluctuate, both potential buyers and homeowners will need to navigate these complex variables moving forward. The interplay of these factors will shape the prospects of the housing market in the subsequent months.