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Existing home sales and new housing starts continue monthly rises amid annual downturn

Existing home sales and new housing starts continue monthly rises amid annual downturn

For the second straight month, existing home sales increased in November, according to the National Association of Realtors. According to NAR data, a seasonally adjusted rate of 5.32 million existing homes were sold in November, marking a 1.9 percent rise from October.

The slight uptick was relatively evenly distributed, as three of the four major U.S. regions saw gains in sales activity.

After six straight months of declines in existing home sales from April to September 2018, these past two months of minor increases could be the start of a trend in the opposite direction. Despite the month-to-month improvement, though, existing home sales were still down 7 percent from the 5.72 million transactions completed in November 2017.

"The market conditions in November were mixed, with good signs of stabilizing home sales compared to recent months, though down significantly from one year ago," said Lawrence Yun, NAR's chief economist. "Rising inventory is clearly taming home price appreciation."

Inventory down month-to-month, up annually

Though total housing inventory continued to decrease on a month-to-month basis, down to 1.74 million in November from 1.85 million in October, November's total inventory still represented an increase in year-over-year inventory from the 1.67 million in total housing inventory in November 2017.

Another annual increase was seen in the median existing-home price for all housing types, which was up to $257,700 last month, marking a 4.2 percent gain over November 2017. Last month was the 81st straight month of year-over-year gains in the median existing home price.

Properties sold in November stayed on the market for an average of 42 days, longer than the 36 days homes spent on the market in October and the 40 days spent on the market in November 2017.

"It is not surprising to see homes remain on the market a little longer," said NAR President John Smaby. "Buyers can often negotiate a more favorable price in those circumstances, especially when paired with a motivated seller and the aid of a realtor familiar with their local market."

Construction of new homes continues rise

The market for new home construction was a bit healthier than the market for existing home sales, according to the U.S. Census Bureau, with privately owned housing starts in November at a seasonally adjusted annual rate of 1,256,000. That total represents a 3.2 percent increase over the 1.22 million housing starts in October, but is 3.6 percent below the November 2017 rate of 1.3 million. 

The 1.1 million housing completions recorded in November marked a 0.4 percent increase over October's 1,095,000 completions, but a 3.9 percent drop from the November 2017 rate of 1,144,000.

One indicator that new housing starts and completions will continue to climb upwards is the seasonally adjusted annual rate of 1,328,000 privately owned housing units authorized by building permits in November, a 5 percent increase over the October rate and a 0.4 percent increase over the November 2017 rate of 1,323,000.

First-time home buyers driving growth

First-time buyers appear to be responsible for many of the increases in existing home sales.

The segment accounted for 33 percent of sales in November, which is up from 31 percent in October and 29 percent one year ago.

Those buyers were apparently undeterred by mortgage rate increases. According to Freddie Mac, the average 30-year fixed rate mortgage rate increased from 4.83 percent in October to 4.87 percent in November. Both numbers are notably higher than the 3.99 percent rate that was the average in 2017.

Despite the rise in mortgage rates, though, home prices themselves have begun to slow more meaningfully, thanks to increases in inventory and time spent on the market. In many ways, the current situation remains a buyers market. If you are interested in taking advantage, contact The Federal Savings Bank today to begin the mortgage preapproval process