Existing home sales increased for the third straight month to their highest point in more than a decade, according to the latest report from the National Association of Realtors.
Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 5.6% from last month to 5.81 million sales in November, up from an upwardly revised 5.5 million sales in October. This represents an increase of 3.8% from last year and their strongest pace since December 2006.
“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,” NAR Chief Economist Lawrence Yun said.
An expert described the growing homebuyer demand as “unquenchable.”
“Strong home buying fundamentals such as low mortgage rates and robust job growth continue to drive unquenchable demand,” Trulia Senior Economist Cheryl Young said. “For the second month in a row in over 12 years, the share of inventory sold exceeded its pre-recession peak.”
“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. “The odds of closing on a home are much better at the upper end of the market, where inventory conditions continue to be markedly better.”
However, one expert pointed out that this surge could be revised down in the coming months.
“November marked the third month in a row in which sales strongly beat expectations, showing strength despite an early Thanksgiving that might have otherwise delayed some closings and ushered in the start of the typically slower holiday season,” Zillow Senior Economist Aaron Terrazas said. “Much of the last month’s surge looks to have been driven by a big spike in sales of condos and co-ops, which may be revised down in coming months.”
Median home prices also increased, rising 5.8% from $234,400 in November 2016 to $248,000 in November this year. This marks the 69th straight month of annual increases.
However, despite these rising home prices, one expert explained the market is not entering a housing bubble.
“Buyer competition is pushing up the median price which rose 5.8% year-over-year,” LendingTree Chief Economist Tendayi Kapfidze. “Historically, tight inventory in the existing markets incents a higher level of housing starts than we are seeing in the marketplace. Thus, we expect prices to remain firm and are optimistic that markets are not exhibiting bubble characteristics despite the strong price growth.”
Housing inventory, however, continues to decrease, falling 7.2% from last month to 1.67 million homes available for sale. This is now 9.7% below last year’s level of 1.85 million, and has fallen year-over-year for 30 consecutive months. Unsold inventory now rests at a 3.4-month supply, down from four months a year ago.
“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.”
One expert explained that while the highly competitive market could see a cool down in 2018, for now, homes continue to fly off the market.
“If you’re looking to buy the home of your dreams, you better not stand still,” said Bill Banfield, Quicken Loans executive vice president of capital markets. “With continued strength in economic growth and jobs, the home buying market is hot.”
“Homes are often selling in under 30 days, pushing up prices and keeping options limited,” Banfield said. “The competitive market may change if interest rates increase in 2018. For the time being, 2017 looks to be closing out as a banner year.”