Published: Thu, December 22, 2016
Economy | By Melissa Porter

U.S. existing home sales unexpectedly rise in November

Purchases of previously owned homes, which account for the vast majority of USA sales, edged up 0.7% from October to a seasonally adjusted annual rate of 5.61 million last month, the National Association of Realtors said Wednesday.

The percentage of first-time buyers slipped by a point month over month to 32% in November, but up from 30% in November 2015.

More specifically, existing-home sales in the Northeast increased 8.0% month over month and 15.7% year over year.

In the Midwest, existing-home sales decreased 2.2% month over month but, nonetheless, increased 18.8% compared with a year earlier. Mortgage rates have surged in the wake of Donald Trump's victory in the November 8 presidential election.

Existing-home sales in the South increased 1.4% month over month and increased 9.2% year over year. The good news is that rates are rising because of continued economic growth, and many households should see income gains in 2017. Furthermore, it's no coincidence that home shoppers in the Northeast - where price growth has been tame all year - had the most success last month.

"Home price appreciation is typically more sensitive to mortgage rate increases and I expect to see a decline in the house price growth rate of nearly a full percentage point by the end of 2017". The number of homes for sale is down 11 percent compared to a year ago, and median prices are up 7 percent. Inventory has declined year over year for 18 consecutive months and is now down 9.3% year over year from 2.04 million in November 2015. Rates have risen further in December, with Freddie Mac reporting last week that the average was 4.16%, the highest reading in more than two years.

Mark Fleming, First American senior vice president and chief economist, told HousingWire that new construction will be vital in 2017.

The unsold inventory represents 4.0-month supply at the current sales pace, down from 4.3 months in October. The U.S. central bank last week raised its benchmark federal-funds rate for just the second time since the 2007-09 recession.

The Federal Reserve has also moved forward with its plan to gradually boost short-term interest rates as a tightening labor market is expected to put upward pressure on inflation.

"This is a housing market at a crossroads", said Stephen Phillips, president of Berkshire Hathaway Home Services in California.

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