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First Cut: Existing home sales decline in November, but underlying trend still solid due to low mortgage rates

Sales of existing homes declined 1.7% in November to 5.35 million units (SAAR) from 5.44 million in the prior month. However, the level was 2.7% above the 5.210 million units in November 2018 when higher mortgage rates had taken a bite out of activity in the housing market. The level was a disappointment compared to market expectations, but it is possible some sales were delayed due to weather or perhaps put off in some areas where the GM strike affected the ability to close the sale.

Sales were down 1.2% to 4.79 million for single-family units month-over-month, but up 3.5% compared to the same month last year. Multi-unit sales were off 5.1% top 560,000 in November from October, and down 3.4% compared to November 2018.

Even with mild increases in mortgage interest rates in the past few months, the 3.70% 30-year fixed rate reported by Freddie Mac for November was still attractive to homebuyers compared to the 4.87% in November of last year.

The supply of homes on the market was a lean 3.7 months’ worth for November, its second narrowest this year. However, limited supplies are not leading to upward pressure on prices. Homebuyers are not committing to existing units without price concessions. The median price of an existing home hardly budged in November from October, up only 0.1% to $271,300. The median price is maintaining the sorts of year-over-year gains that have been the recent underlying trend. In November, the price was up 5.4%.

Sales of existing homes were mixed across regions. Sales were higher for the Northeast (up 1.4%) and Midwest (up 2.3%), while they declined in the South (down 3.9%) and West (down 3.5%). For the former two, buyers probably were anxious to close contracts while rates remained low and before the colder months set in. In the South, the decline represented a reset after a jump in sales in the prior month and a return to the underlying trend. For the West, sales might have been hard to come by with reduced housing stock after large wildfires.


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