November Home Sales Drop 7% for 10th Consecutive Month of Decline

The National Association of Realtors reported that sales of existing homes decreased by 7.7% in November when compared to the previous month.

The seasonally adjusted annualized rate was 4.09 million units, which was lower than the 4.17 million units that housing analysts had anticipated. This was a much steeper decrease than is typical for monthly drops.

Sales have been decreasing for the past ten months, with the most recent drop being 35.4% year over year. This is the lowest rate since November 2010, with the exception of May 2020 when the Covid pandemic first began and sales plummeted. During November 2010, the US was in the midst of the Great Recession and a foreclosure crisis.

The number of closings is what these counts are based on, so it is likely that the contracts were signed in September and October when mortgage rates were at their highest before dropping slightly in the past month. Currently, the rates are about one percentage point lower than they were at the end of October, but still higher than the beginning of the year when they were twice as low.

According to Lawrence Yun, NAR's chief economist, the residential real estate market in November was similar to the sales activity experienced during the Covid-19 economic lockdowns in 2020. He attributed this to the sudden rise in mortgage rates, which made housing less affordable and discouraged homeowners from listing their properties. Additionally, the amount of available housing inventory is still near record lows.

At the end of November, there were 1.14 million homes available for purchase, a 2.7% increase from the same time the previous year. However, the current rate of sales indicates a 3.3 month supply, which is still relatively low.

The median sale price of homes in November was $370,700, a 3.5% increase from the same time last year. This is the highest November price the Realtors have ever recorded, and the longest running streak of year-over-year price gains since the Realtors began tracking this in 1968. The annual gains are slowing down, however, due to the low supply of homes. As a result, 23% of homes sold above list price.

In the past five months, home prices have decreased from their summer highs. Simultaneously, rent growth has been declining for 10 months in a row, according to George Ratiu, senior economist at Realtor.com. Despite this, the cost of real estate is still difficult for many people to afford, especially with high inflation and high interest rates diminishing their purchasing power.

All regions experienced a decrease in sales, but the West saw the most significant drop of nearly 46% compared to the same time last year. Prices in the West are the highest, which could be a contributing factor to the decline.

In November, the average time a home stayed on the market was 24 days, which is longer than the 21 days in October and 18 days in November 2021. Despite the slower market, the majority of homes (61%) were sold within a month.

Despite prices remaining high and mortgage rates reaching a peak, first-time buyers stayed away from the market. Their presence in November was the same as October, at 28%, and slightly higher than the 26% in November 2021. Generally, first-time buyers make up 40% of the market, but a survey from the Realtors showed that the annual share was 26%, the lowest since they started tracking.

Sales decreased in all price ranges, but the most significant decrease was in the luxury million-dollar-plus category, which saw a 41% decrease compared to the same time last year. This sector had experienced the most growth during the early stages of the pandemic.

Mortgage rates have decreased from their recent highs, but it is uncertain if this will be enough to balance out the increased prices.

Mortgage rates have been on a downward trend for the past five weeks, which could be a sign that the market is beginning to thaw. This decrease in rates has resulted in a decrease in the average monthly mortgage payment, which is now almost $200 lower than it was when interest rates reached their peak earlier this year.