November Home Sales Face Challenges Amid High Rates

Current Market Trends and Sales Data

In November, existing home sales saw a modest rise of 0.5% compared to October, reaching an annualized rate of 4.13 million units, according to the National Association of Realtors (NAR). However, year-over-year sales were down 1%, reflecting the ongoing challenges in the housing market. The increase in sales was influenced by contracts signed earlier in the fall when mortgage rates slightly declined.

Inventory levels also continued to tighten, falling 5.9% from October to 1.43 million homes available for sale. This represents a 4.2-month supply at the current sales pace, well below the six-month supply considered a balanced market. Year-over-year, inventory has dropped by 7.5%, putting further pressure on buyers.

Factors Impacting Housing Market

The housing market remains constrained by elevated mortgage rates and persistently high home prices. Despite a slight dip in rates during the fall, the affordability crisis has limited the pool of potential buyers, especially first-time homebuyers. In November, first-time buyers accounted for 30% of home sales, a figure significantly below the historical norm of 40%.

Additionally, affordable housing options remain scarce. Homes priced between $100,000 and $250,000 saw an 8% decline in sales year-over-year, while higher-priced homes above $1 million performed better. Wage growth has provided some relief by slightly outpacing home price increases, but it has not been enough to offset the affordability challenges posed by elevated borrowing costs.

Future Market Outlook

Looking ahead, experts suggest that a rebound in home sales could materialize in 2025, contingent on improved economic conditions and lower mortgage rates. The NAR forecasts a 14% increase in sales next year, though other analysts predict more conservative growth ranging between 1.7% and 9%.

Economic stability and a strong labor market will be critical for the housing market's recovery. However, continued affordability challenges and tight inventory may temper growth. While mortgage rates are expected to remain near 6% in 2025, any significant fluctuations could greatly influence both buyer activity and overall market performance.