WASHINGTON (AP) — 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 percent 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 percent from a year earlier.
Sales rose 8 percent in the Northeast, but fell in the West and Midwest.
Existing-home sales in the South in November rose 1.4 percent to an annual rate of 2.22 million, and are now 11.6 percent above November 2015. The median price in the South was $206,900, up 9.2 percent from a year ago.
Fewer than 1.9 million homes were on the market, down 9 percent from a year earlier. The tight supply pushed the median price to $234,900 last month, up 6.8 percent from a year ago.
The Commerce Department reported Friday that housing starts fell 18.7 percent 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.”
“Existing housing supply at the beginning of the year was inadequate and is now even worse heading into 2017,” Yun said. “Rental units are also seeing this shortage. As a result, both home prices and rents continue to far outstrip incomes in much of the country.”
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 percent. 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 defense 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 percent 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.
First-time buyers were 32 percent of sales in November, which is down from 33 percent in October but up from and 30 percent a year ago. NAR’s 2016 Profile of Home Buyers and Sellers – released in November5 – revealed that the annual share of first-time buyers was 35 percent (32 percent in 2015), which is the highest since 2013 (38 percent).
“First-time buyers in higher priced cities will be most affected by rising prices and mortgage rates next year and will likely have to stretch their budget or make compromises on home size, price or location,” said Yun.
Still, a healthy job market has given more Americans the confidence to shop for homes. Unemployment is at a nine-year low 4.6 percent. – Additional reporting by FWBP Staff