WASHINGTON – The number of people who bought existing U.S. homes in November declined for the third straight month. Higher mortgage rates have made home-buying more expensive, while the lingering effect of the October government shutdown might have deterred some sales.
Home re-sales fell 4.3 per cent to an annual rate of 4.90 million, the National Association of Realtors said Thursday. That was the weakest pace since December 2012 and the first time since April that the pace has slipped below 5 million.
Still, the Realtors’ group predicts that total sales this year will be 5.1 million. That would be the strongest since 2007, when the housing bubble burst. But it’s still below the 5.5 million generally associated with healthy housing markets.
Home sales could rebound in the new year if the strengthening job market lifts incomes and builds confidence in the economy.
Over the summer, re-sales reached a pace of 5.39 million, the fastest in four years. But sales began to slow in September as the costs of buying a home rose.
Mortgage rates are nearly a full percentage point higher than in the spring, when they were near record lows. And a limited supply of homes on the market has driven up prices. The combination has made home buying less affordable, particularly for first-timers.
Sales in November were 1.2 per cent lower than in the same month a year ago, the first year-over-year decline in 29 months.
The Realtors’ group said the main factor in the sales decline was less affordability. But it also cited fallout from the 16-day partial closure of the federal government, which might have delayed some sales.
The median sales price of an existing home was $196,300 in November. That was a slight decrease from October but 9.4 per cent higher than a year ago.
Home-buying has declined 10.1 per cent in Western states during the past 12 months. That drop has been partially offset by stronger sales in the Northeast and South.
The number of homes on the market in November fell 0.9 per cent from October. But the supply has increased over the past 12 months. This could slow the rate of price increases because more homes would be available for sale.
There are signs that housing will strengthen next year. Builders broke ground on new homes last month at the fastest pace in more than five years. And builders’ confidence in the market rose this month to match the highest level in eight years.
Mortgage rates have risen about a percentage point from historic lows earlier this year. The average rate on a 30-year fixed rate mortgage last week was 4.42 per cent.
One concern is that first-time buyers accounted for just 28 per cent of sales in November. That was down from 30 per cent a year ago. In healthier housing markets, they typically make up at least 40 per cent of buyers.
Many would-be buyers are struggling to qualify for loans, in part because banks have tightened standards and are requiring bigger down payments.
The market has received a boost from investors and all-cash buyers. Cash purchases made up 32 per cent of transactions in November, up from 30 per cent a year ago. Investors made up 19 per cent of sales.