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Existing home sales data released by the National Association of Realtors (NAR) shows that home sales increased for the month of November but hit a 7-year low annually.

Key Takeaways

• NAR stated that existing home sales jumped 1.9% in November to a seasonally adjusted annual rate of 5.32 million units compared to October’s unrevised rate of 5.22 million units.
• Sales have increased for two consecutive months. However, the annual data is rather bleak with existing home sales at their lowest in approximately 7.5 years.

The monthly sales are actually higher than forecast with economists predicting a 0.6% drop to 5.2 million units. However, existing home sales still dropped 7% annually, the largest drop since May 2011 - existing home sales account for 90% of all US home sales.

Sales have decreased 2.3% from January to November compared to the same period in 2017, with mortgage rates and shortages of skilled workers impacting sales significantly. In a survey, builders claimed that demand for houses is there, but wage increases are being outpaced by wage inflation along with market uncertainty and lack of affordability regarding the recent interest rate hikes introduced by the Federal Reserve, with a fourth rate hike this year likely to come soon.

The rate for a 30-year fixed mortgage has risen 60 basis points or 4.63% this year.

For a 2nd month, #existing #home sales rose in Nov, by 1.9% to a 5.32 million rate. Sales rose in all regions except the West. Despite the gain, existing home sales were off 7.0% Y/Y. #Housing #inventories fell to 1.74 million, a 3.9 month #supply, down from 4.3 a year ago. pic.twitter.com/4MwIz0xxCd

— Thomas Kevin Swift (@DrTKSwift) December 19, 2018

Market Slump

Single-family home building dropped to a yearly low last month according to yesterday’s report. Sales rose in the South which has a high population density, as well as the Northeast and Midwest, while falling in the West. The wildfires which struck California most likely impacted the drop in sales.

At the sales pace seen in November it would take 3.9 months to sell all the houses currently on the market, compared to 4.3 months in October and 3.5 months this time last year. The ideal figure is 6 - 7 months which is considered to accommodate both supply and demand in a sustainable manner.

1.74 million previously owned homes were put on the market last month compared to 1.67 million in October, and on average house prices are up 4.2% from last year with the median price now set at $257,000.

Expert Outlook

“After a run of negative news for the housing sector, today’s report is a welcome change. Longer-term, however, the trend in housing is clearly slowing as affordability takes a bite,” said BMO Economics’ Jennifer Lee.

Ian Sheperdson, chief economist for Pantheon Macro, stated that “The rebound in November still leaves sales well short of the pace implied by the recent rebound in the mortgage applications numbers, so we see real scope for hefty further gains in sales over the next few months.

This will reduce the excess inventory in the market and support prices, but we don’t expect the revival to last beyond the spring, because we expect mortgage rates to rebound. Still, anything which interrupts the ‘housing is collapsing’ narrative is welcome, because it isn’t.”

Meanwhile, NAR chief economist Lawrence Yun said the data showed some stability in the housing market, which has dipped recently - he also said the growth housing inventory should help bring prices down.

Market Reaction

Gold prices held near a 5-month high in the face of the mixed-to-negative housing market data. Spot gold is trading at $1,251.98/oz, up 0.22% on the day.