The end of the year usually means a slowdown in home sales, but this year is showing to be an exception, with existing-home sales growing in November for the third straight month to reach their strongest pace in nearly 11 years, according to the latest report from the National Association of Realtors (NAR).
Total existing-home sales increased to 5.81 in November, up 5.6 percent from October and 3.8 percent from November 2016, marking the strongest pace since December 2006, when there were 6.42 million sales.
NAR reports that all regions saw a significant jump in sales activity last month except for the West, which saw a 2.3 decrease in sales activity. However the Midwest, South, and Northeast saw sales gains of 8.4 percent, 8.3 percent and 6.7 percent, respectively.
“Faster economic growth in recent quarters, the booming stock market and continuous job gains are fueling substantial demand for buying a home as 2017 comes to an end,” said Lawrence Yun, NAR chief economist.
The streak continues for price gains, inventory losses
The median existing-home price rose from $234,400 last November to $248,000 at the same time this year, an increase of 5.8 percent and the 69th straight month of year-over-year gains.
Housing inventory shrunk to 1.67 million existing homes available for sale, a 7.2 percent drop from October and 9.7 percent lower than this time last year. November marks the 30th consecutive month of year-over-year declines in inventory. Unsold inventory currently sits at a 3.4-month supply, which is down from a four-month supply this time last year.
Properties stayed on the market an average of 40 days in November, which is up from 34 days in October but down from 43 days last year. NAR also reports that 44 percent of homes sold in November were on the market for less than a month.
“The anticipated rise in mortgage rates next year could further cut into affordability if these staggeringly low supply levels persist,” Yun said. “Price appreciation is too fast in a lot of markets right now. The increase in homebuilder optimism must translate to significantly more new construction in 2018 to help ease these acute inventory shortages.”
First-time homebuyers struggle to get into the market
First-time homebuyers made up only 29 percent of sales in November, down from 32 percent in October 2017 and November 2016. All-cash sales made up 22 percent of all transactions last month, which is the highest share since May and up from 20 percent in October and 21 percent in November 2016.
“As evidenced by a subdued level of first-time buyers and increased share of cash buyers, move-up buyers with considerable down payments and those with cash made up a bulk of the sales activity last month,” Yun said.
He also notes that the increase in investors paying in cash is adding to the lack of first-time homebuyers as they are grabbing supply and forcing up home prices.
“The healthy labor market and higher wage gains are expected to further strengthen buyer demand from young adults next year,” Yun said. “Their prospects for becoming homeowners will only improve if more lower-priced and smaller-sized homes come onto the market.”