Existing home sales rose for a second straight month, up 1.9% to 5.32 million units (annualized) in November. The improvement in sales defied the median consensus forecast for a 0.4% pullback.
By component, single-family sales rose 1.9% on the month, while the condo/co-op segment rose 1.7%. Overall, sales up 3.3% from their low in September, but are still down 7% from year-ago levels, with single-family down 6.7% and condo/co-ops down 9.0% year-over-year.
The number of homes available for sale fell to a seasonally unadjusted 1.74 million units from 1.85 million in October, which at the current sales rate, puts supply at just 3.9 months (down from 4.3 in October).
Median existing home prices were up 4.2% from a year ago, accelerating from 3.7% in October.
Key Implications
This is an encouraging report. Expectations for home sales have been beaten down by several months of declines. While far from easy street, the market appears to be stabilizing.
The good news is that the majority of the adjustment in mortgage rates appears to be in the rear-view mirror. Assuming a more staid pace of increases from the Federal Reserve, we expect only a modest 20 basis points in additional rate increases over the next year, small change compared to the 90 basis points that have occurred in the past year.
Inventory levels that remain near historical lows will continue to be a constraint to housing activity, and keep upward pressure on prices even with relatively modest demand. This should also encourage more housing construction and economic activity over the next year.
