November saw impressive gains in the real estate market, according to a recent report from the National Association of Realtors. Existing-home sales increased 0.7% month over month, landing at an annual rate of 5.61 million during the first 11 months of the year.
The gains put November 2016 15.4% ahead of November 2015 and marked the third month in a row during which growth was experienced in this area. Lawrence Yun, the NAR's chief economist, noted that he wasn't surprised by the positive news.
"November marks the third consecutive month of existing home sale increases."
"The healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates accurately rose from their historically low level have combined to drive sales higher in recent months," he said in a statement. "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."
While Yun commented that November's pace seemed in line with current circumstances, other industry experts had anticipated a slightly less productive month. CNBC reported some economists predicted home sales to fall 1% in November to 5.5 million.
These economists weren't all wrong. In fact, there were only two areas of the country that saw increasing home sales:
But in the Midwest and the West, home sales dropped 2.2% and 1.6%, respectively.
As Yun noted, the high possibility of increasing interest rates could have encouraged prospective homebuyers to move quickly in November. Sure enough, the Federal Reserve voted to increase the key funds rate during the last Federal Open Market Committee Meeting of the year, which ended Dec. 14. While this may not immediately impact mortgage rates, there's a good chance residential mortgage rates will begin to creep up in the coming weeks and months.
Even though November proved to be a successful month in home sales, many industry experts believe there will be a slight dip heading into 2017. Rising mortgage rates could be a factor, but likely won't be the only cause. Throughout the course of 2016, a common theme holding back home sales still rings true: Inventory is too low to accommodate all of the home shoppers on the market.
"Existing housing supply at the beginning of the year was inadequate and is now even worse heading into 2017," Yun explained. "Rental units are also seeing this shortage. As a result, both home prices and rents continue to far outstrip incomes in much of the country."
Inventory at the end of November included 1.85 million existing homes, 8% fewer than in October and 9.3% fewer than November 2015. This is the 18th month in a row of year-over-year inventory decreases.
The very fact that there aren't enough homes to go around will slow down sales. But the problem is manifesting in another way as well: increasing home costs. The median existing-home price was $234,900, nearly 7% higher in November 2016 than it was in November 2015. Home prices have been steadily seeing year-over-year increases like this for nearly five years.
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