Home sales notch fourth straight month of gains in November
The housing market accelerated for the fourth consecutive month in November, with a widely followed indicator of pending home sales from the National Association of Realtors gaining 2.2% over October.
Those gains contributed to a 6.9% year-over-year improvement in pending transactions. Homebuyers seem to have grown accustomed to stubbornly high mortgage rates, as they’re buying new homes at a steady clip across the United States, said NAR chief economist Lawrence Yun.
“Consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory,” Yun said in a statement.
The NAR’s pending home sales index is a forward-looking measure based on contract signings and is benchmarked against the level of contract activity in 2001. A reported indicator of 100 would mean the level of contract activity is equal to that of 2001; the number reported for November came in at 79.
The improvement in contract signings four months in a row shows that the housing market might be recovering from a long slump in sales induced by rising rates starting in 2022, when the Federal Reserve started hiking the cost of borrowing to get inflation under control.
As mortgage rates surged, the increase in borrowing costs added hundreds of dollars every month to buyers’ mortgage expenses. The housing market slowed as fewer buyers were able to afford homes, while homeowners with cheaper mortgages were reluctant to sell.
Those waiting for rates to fall have largely been frustrated as mortgage rates have remained elevated above 6% for the past two years. The average rate on a 30-year mortgage actually jumped last week to 6.85%, according to Freddie Mac, reaching its highest level since July.
The data released Monday shows a shift in how consumers view the elevated rates, with more deciding to buy new homes anyway, Yun said.
“Buyers are no longer waiting for or expecting mortgage rates to fall substantially,” Yun said.
At the same time, gradual increases in inventory have meant the housing market is becoming more favorable to buyers, Yun said.
The gains on the NAR index were broad-based across the United States: On a seasonally adjusted basis, the West saw the strongest growth year-over-year, with an 11.8% gain, while the South gained 8.5 percent. The Midwest grew by only 1.6% year-on-year, while the Northeast increased by 5.6 percent.
The growth in sales comes even as home prices have largely held up in most places, leaving buyers little relief. Housing prices grew by 0.3% in November over October, according to the Labor Department’s most recent inflation report. Housing accounted for more than 40% of the overall monthly rise in inflation, although shelter costs grew more slowly than in the prior month.
Hannah Jones, senior economic research analyst at Realtor.com, said she expects prices to keep rising in 2025, while slightly lower mortgage rates and improving inventory should entice more buyers to the table. The Fed has two more rate cuts planned for 2025, something that should exert downward pressure on interest rates.
“On the plus side, we expect to see mortgage rates continuing to ease and housing inventory to grow next year as builder activity and the weakening lock-in effect bring more homes to the market,” Jones said, referring to the reluctance of current owners to sell homes they bought at cheap rates. “However, still-limited home supply is expected to boost price growth, which means housing costs are likely to remain high.”