Sales of previously owned homes increased for the third straight month in November to the highest level in nearly 11 years, a new report showed on Wednesday.
Existing-home sales, which are completed transactions that include single-family homes and condominiums, surged 5.6 percent to a seasonally adjusted annual rate of 5.81 million last month from 5.5 million in October, according to the National Association of Realtors (NAR).
{mosads}After last month’s increase, which was better than expectations, sales are 3.8 percent higher than a year ago and have hit their fastest pace since December 2006.
All regions except for the West saw a jump in sales activity last month.
“Faster economic growth in recent quarters, the booming stock market and continuous job gains are fueling substantial demand for buying a home as 2017 comes to an end,” said Lawrence Yun, NAR’s chief economist.
Inventory remained a problem for the housing market and likely weighed on overall sales.
Total homes for sale at the end of November dropped 7.2 percent to 1.67 million, which is 9.7 percent lower than a year ago.
Unsold inventory is at a 3.4-month supply at the current sales pace, which is down from 4 months a year ago.
“It is highly likely that existing sales would have been much stronger in 2017 if supply had been more abundant,” said Nationwide chief economist David Berson.
The median existing-home price for all housing types in November was $248,000, up 5.8 percent from November 2016, the 69th straight month of year-over-year gains.
The average rate for a 30-year fixed-rate mortgage increased for the second straight month to 3.92 percent in November from 3.9 percent in October, according to Freddie Mac.
Yun said that an expected increase in mortgage rates next year “could further cut into affordability if these staggeringly low supply levels persist.”
“Price appreciation is too fast in a lot of markets right now,” Yun said.
He noted that the increase in homebuilder optimism will likely mean more new construction in 2018 to help ease persistent inventory shortages.
Builder confidence in the market for new homes increased five points to 74 in December, the highest reported since July 1999, the National Association of Home Builders (NAHB) said Tuesday.
“With low unemployment rates, favorable demographics and a tight supply of existing-home inventory, we can expect continued upward movement of the single-family construction sector next year,” said NAHB chief economist Robert Dietz.
Berson said he expects existing sales to climb 1.6 percent to 5.54 million units this year, which would be the strongest pace since 2006.
“We expect further increases in sales in 2018, although tax reform is likely to modestly reduce demand at the high end (as well as to lower prices for high-priced homes),” he said.
On tax reform, NAR President Elizabeth Mendenhall said following congressional clearance of the tax overhaul package that there is good news for homeowners because they can count on the mortgage interest deduction and the state and local tax deduction.
“While we’re pleased that important homeownership incentives such as the capital gains exclusion survived in conference, additional changes are required to truly incentivize homeownership in the tax code.”
First-time buyers were 29 percent of sales in November, which is down from 32 percent in both October and a year ago, the NAR report said.
All-cash sales were 22 percent of transactions in November, which is up from 20 percent in October and 21 percent a year ago.
The hottest metro areas in November were San Jose-Sunnyvale-Santa Clara, Calif.; Vallejo-Fairfield, Calif.; San Francisco-Oakland-Hayward, Calif.; San Diego-Carlsbad, Calif.; and Stockton-Lodi, Calif.
Distressed sales — foreclosures and short sales — were 4 percent of sales for the fourth straight month in November, down from 6 percent a year ago.
Single-family home sales grew 4.5 percent to a seasonally adjusted annual rate of 5.09 million in November from 4.87 million in October, and are now 3.2 percent above the 4.93 million pace a year ago.
Existing-home sales in the Northeast rose 6.7 percent, jumped 8.4 percent in the Midwest and expanded 8.3 percent in the South.
Sales in the West declined 2.3 percent.