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Sales of previously owned U.S. homes declined to a five-month low in November, indicating lean inventories are holding back a residential real estate market that’s been supported by low mortgage rates and job growth.

Contract closings fell 1.7% from the prior month to a 5.35 million annual rate, the National Association of Realtors said Thursday. That was slightly weaker than the median projection of 5.44 million in a Bloomberg survey of economists. The median sales price rose 5.4% from a year earlier to $271,300.

Key Insights

  • The figures contrast with a series of upbeat readings on the housing sector that have signaled conditions are continuing to improve after the 2018 slowdown. Federal Reserve interest-rate cuts have helped push mortgage rates down while strong labor-market readings have buoyed consumers and underpinned sentiment among Americans.
  • The year-over-year advance in selling prices indicate a still-solid housing market that has left inventory of properties lean and buyers with fewer options. The number of homes available in November fell 7.3% from a year earlier to 1.64 million, a record low for the month, NAR’s data showed.
  • The data follow other reports this week showing positive momentum across the housing market. Construction of new homes increased more than forecast in November and permits to build climbed to a 12-year high, according to government figures. The National Association of Home Builders/Wells Fargo Housing Market Index surged in December to the highest since 1999 amid stronger sales.

Official’s View

  • “America is facing a housing shortage and affordability challenges,” though demand remains solid, Jessica Lautz, the NAR’s vice president of demographics, said at a briefing in Washington. “More inventory is needed at the lower end and price reductions may be needed at the higher end.”

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  • Forty-five percent of the homes sold in November did so in less than a month, a sign of robust demand.
  • Sales last month declined in the South, the nation’s largest region, to an annualized 2.24 million pace, the slowest since the start of the year; purchases also declined in the West.
  • At the current pace, it would take 3.7 months to sell all the homes on the market, the shortest period since February, compared with 3.9 months a month earlier; Realtors see anything below five months of supply as a sign of a tight market.
  • First-time buyers made up 32% of sales, compared with 31% the previous month.Existing-home sales account for about 90% of U.S. housing and are calculated when a contract closes. New-home sales, which make up the remainder, are counted when contracts are signed and will be released Thursday. –With assistance from Ana Monteiro.
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