Sales of existing homes fell 7.7% in November compared to October, according to the National Association of Realtors.
The seasonally adjusted annual pace was 4.09 million units. That’s weaker than the 4.17 million housing analysts had predicted, and it was a much deeper drop than the usual monthly decline.
Sales were down 35.4% year-on-year, marking the tenth consecutive month of decline. It was the weakest pace since November 2010, with the exception of May 2020, when sales fell sharply, albeit briefly, during the early days of the Covid pandemic. In November 2010, the nation was mired in the Great Recession as well as a foreclosure crisis.
These counts are based on closings, so contracts were likely signed in September and October, when mortgage rates last peaked before falling slightly last month. Prices are now about one percentage point lower than they were at the end of October, but still slightly more than double what they were at the beginning of this year.
“Essentially, the residential real estate market froze in November, which was similar to the sales activity seen during the Covid-1[ads1]9 economic shutdowns in 2020,” said Lawrence Yun, NAR’s chief economist. “The most important factor was the rapid increase in mortgage rates, which hurt housing affordability and reduced incentives for homeowners to list their homes. In addition, available housing inventory remains near historic lows.”
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At the end of November, there were 1.14 million homes for sale, which is an increase of 2.7% from November last year, but at today’s rate of sales it still represents a low 3.3 months of supply.
Low supply kept prices higher than a year ago, up 3.5% to a median sales price of $370,700, but those annual gains are shrinking quickly, well outside the double-digit gains seen earlier this year. It is still the highest November price real estate agents have ever recorded, and at 129 months straight, it is the longest streak of year-over-year price increases since real estate agents began tracking this in 1968. About 23% of homes sold above list price, due to tight supply.
“We’ve seen home prices fall from summer peaks over the past five months. At the same time, we’ve also seen rent growth retreat for 10 consecutive months,” George Ratiu, senior economist at Realtor.com wrote in a release. “However, the cost of property remains challenging for many households looking for a place to call home, particularly as high inflation and continued high interest rates have eroded purchasing power.”
Sales fell in all regions, but fell hardest in the West, where prices are highest, down almost 46% from a year ago.
Homes stayed on the market longer in November, an average of 24 days, up from 21 days in October and 18 days in November 2021. Despite the slower market, 61% of homes went under contract in less than a month.
With prices still high and mortgage rates reaching a cyclical peak, first-time buyers remained on the sidelines. They accounted for 28% of sales in November, which was unchanged from October, and slightly up from 26% in November 2021. Historically, first-time buyers make up about 40% of the market. A separate survey by Realtors put the annual share at 26%, the lowest since they began tracking.
Sales fell across all price categories, but took the steepest dive in the luxury million-dollar-plus category, falling 41% year over year. That sector had seen the biggest gains in the early years of the pandemic.
Mortgage rates have reached recent highs, but it remains to be seen whether that will be enough to compensate for higher prices.
“The market may be thawing since mortgage rates have fallen for five consecutive weeks,” Yun added. “The average monthly mortgage payment is now nearly $200 less than it was several weeks ago when interest rates peaked for this year.”