Mortgage Orb - Patrick Barnard - 21 December 2016
Was it the final push before the great slowdown?
Despite rising interest rates, existing-home sales in November increased for a third straight month to reach the highest annual rate since February 2007, according to the National Association of Realtors (NAR).
A big surge in the Northeast and a smaller gain in the South pushed existing-home sales to a seasonally adjusted annual rate of 5.61 million, up 0.7% compared with a downwardly revised 5.57 million in October and up 15.4% compared with a rate of 4.86 million in November 2015.
More specifically, existing-home sales in the Northeast increased 8.0% month over month and 15.7% year over year.
Existing-home sales in the South increased 1.4% month over month and increased 9.2% year over year.
In the Midwest, existing-home sales decreased 2.2% month over month but, nonetheless, increased 18.8% compared with a year earlier.
In the West, sales decreased 1.6% month over month but, nonetheless, increased 19.0% year over year.
The median existing-home price for all housing types in November was $234,900, up 6.8% from $220,000 in November 2015.
As of the end of November, there were about 1.85 million existing homes available for sale – about a four-month supply at the current sales pace. That’s a decrease of 8.0% compared with October and a decrease of 9.3% compared with November 2015.
“Existing housing supply at the beginning of the year was inadequate and is now even worse heading into 2017,” says Lawrence Yun, chief economist for NAR, in a statement. “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.”
Meanwhile, mortgage rates have been increasing steadily since the presidential election on Nov. 8. Should rates continue to rise through 2017, it is expected to put a damper on home sales, especially for first-time home buyers.
About 32% of sales in November were to first-time home buyers, according to NAR’s report. That’s down from 33% in October but up from 30% in November 2015.
“First-time buyers in higher-priced cities will be most affected by rising prices and mortgage rates next year and will likely have to stretch their budget or make compromises on home size, price or location,” says Yun.
About 21% of transactions in November were all-cash sales – down from 22% in October and down from 27% a year ago.
Individual investors, who typically account for the lion’s share of all-cash sales, purchased 12% of homes in November – down from 13% in October and down 16% compared with a year earlier.
Fifty-eight percent of investors paid in cash in November, which matches the lowest share since August 2009.
Distressed sales, including foreclosures and short sales, accounted for about 6% of all sales in November – up from 5% in October but down from 9% a year ago.