Existing US home sales reach highest since February 2007

WASHINGTON – Americans bought homes in November in the fastest pace in nearly a decade. But rising mortgage rates, a deepening shortage of houses and higher prices are likely to weigh on the market next year.

The National Association of Realtors said Wednesday that sales of existing homes rose 0.7 per cent last month to a seasonally adjusted annual rate of 5.61 million. That was up from a downwardly revised 5.57 million in October and the highest since sales hit a 5.79 million pace in February 2007. Sales were up 15 per cent from a year earlier.

Sales rose 8 per cent in the Northeast and 1.4 per cent in the South, but fell in the West and Midwest.

Fewer than 1.9 million homes were on the market, down 9 per cent from a year earlier. The tight supply pushed the median price to $234,900 last month, up 6.8 per cent from a year ago.

The Commerce Department reported Friday that housing starts fell 18.7 per cent last month to a seasonally adjusted 1.09 million.

“We have a housing shortage,” said Lawrence Yun, the Realtors’ chief economist. “We are not building enough housing.”

At the same time, the rate on the benchmark 30-year fixed rate mortgage last week rose to a 52-week high of 4.16 per cent. U.S. interest rates have climbed since the Nov. 8 election of Donald Trump. Investors have bid rates higher because they expect Trump’s program of tax cuts and higher spending on defence and infrastructure will boost economic growth and inflation.

The Realtors predict that higher rates and declining affordability in many parts of the country likely will lead to only a small gain in sales of existing homes next year — a 2 per cent increase to about 5.52 million.

“Some prospective buyers are going to be straining to get to an affordable monthly payment with mortgage rates higher and may take a harder line on prices (or settle for less home) to make the numbers work,” Stephen Stanley, chief economist at Amherst Pierpont Securities, said in a research note.

Still, a healthy job market has given more Americans the confidence to shop for homes. Unemployment is at a nine-year low 4.6 per cent.