November Existing Home Sales: Signs of Life

• November existing home sales rose 1.9 percent from October to 5.32 million sales, according to the National Association of Realtors. Sales were down 7 percent from a year ago — when a rush of closings were pushed forward in advance of changes to federal tax laws that diminished some traditional and longstanding homeownership tax advantages.
• The median existing home sale price in November was $257,700, up 4.2 percent from November 2017. November's price increase marks the 81st straight month of year-over-year gains.
• Total inventory fell from October, to 1.74 million homes available for sale from 1.85 million, but was up from 1.67 million a year ago.

A small recovery in inventory beginning in September is paying some dividends as the year comes to a close, breathing some life into an existing sales market that has been pretty limp for much of 2018. Existing sales began flat lining two years ago, when tight inventory helped put the brakes on resale activity.

A volatile mix of rising mortgage interest rates, tax changes and an increasingly cloudy macroeconomic outlook heading into 2019 is introducing more than a little uncertainty into the minds of buyers and sellers alike, and it’s unknown how this will play out as conditions develop. On the one hand, affordability issues driven by consistently rising prices and fast growth in mortgage interest rates are clearly having an effect on many buyers budgets, especially at the ultra-competitive entry level. This affordability crunch is particularly acute in the pricey West, the only major region in which existing sales fell in November.

But taking a step back, it’s clear that rising rates aren’t impacting everyone the same — and it can be too easy to confuse “higher” rates with “high” rates. Rates on a 30-year, fixed mortgage are currently hovering around 4.6 percent, which is up almost 100 basis points from recent lows, but remains incredibly low historically speaking, and is still helping to keep monthly payments in check on increasingly expensive homes. Still, buyers no longer seem as automatically willing to pay the sticker price on a home, and the share of homes listed with at least one price cut is growing rapidly.

The most affordable markets continue to offer healthy gains, but in markets where price growth has long outpaced gains in income and where affordability is already stretched, buyers and sellers alike are both starting to adjust their expectations. There is no doubt that the housing market is moving toward a phase where there is more uncertainty for both buyers and sellers, and where above-market gains are no longer guaranteed. And with the scars of a decade ago still fresh for many, this newfound uncertainty can be disorienting.

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