Key Takeaways:
- November figures approach the 673,000 peak from October 2020
- Home sale growth is led by the Midwest, with a 4.2 percent increase
- A resurgence is unlikely as continued low supplies put a lid on growth
- Average home prices rose by 8.6 percent over last November
By Manuel Gutierrez, Consulting Economist to NKBA
Following a modest increase of 0.8 percent in October, existing home sales rose by a stronger 1.9 percent in November to an annual rate of 6.46 million homes. This is 120,000 more units than in the previous month.
Despite the increase, November home sales are below the peak of 673,000 attained in October of last year.
After peaking, home sales fell gradually for the first five months of this year until they began a slow ascent to their current level (Figure 1.)
Regionally, two of the U.S. regions saw an increase in sales. The Midwest was up 4.2 percent to an annualized 1.5 million homes sold, and the South rose a minimal 0.4 percent to a 2.78 million rate.
The number of houses sold in the West were unchanged vs. October, to 1.31 million homes annually. The Northeast was the only region showing a home sales decline, falling by 2.6 percent to a 750,000-unit annual rate.
Despite the strong demand for housing, a resurgence in home sales for the near future is not in the cards. Sales continue to be constrained by availability of homes.
The current supply remains near historical lows. In November, there were just 1.1 million homes for sale – the fourth consecutive monthly drop in inventory, and 12,000 fewer homes than in October. There are 13.3 percent fewer homes available than a year ago, when 1.28 million homes were in the market.
The vast majority of the inventory is in single family homes, accounting for 86 percent of the total. The remaining 14 percent are either town houses or condominiums.
Home inventory at the current sales rate of 6.46 million houses translates into a 2.1 months’ supply (Figure 2). That is, if nothing else changes, the inventory would last for only 2.1 months.
Inventory of available homes for sale is down to a 2.1-month supply, 13% lower than a year ago.
Consumer housing needs for both owning or renting a home, constrained by fewer homes available, are pushing house prices higher.
The average price of an existing home rose 8.6 percent in November vs. a year ago, with the average house prices reaching an all-time high of $372,000.
The median price of an existing home in November was $354,000, or 13.9 percent above 2020 prices.
Note that home price averages are based on a number of factors, including home characteristics and locations. For instance, if during a given month the percentage of total U.S. home sales increases in the South, since homes in that region on average have sales prices 8 percent lower than nationally, it would bring down the overall average for the month.
In contrast, the Case-Shiller index compares the price of the same house at two different times, which eliminates the influence of factors such as location and size of house.
Prices in the South rose 12.8 percent in November from a year ago for a current regional average of $344,000. In the West, house prices jumped 9.1 percent to an average of $500,000 – the highest in the nation. The Midwest, which has the lowest priced homes among the four regions, saw prices increase by 7.3 percent to $285,000, with the Northeast seeing increases of just 2.4 percent to an average of $382,000.
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