Existing Home Sales rise in November

Summary

Resales perk up, but affordability issues remain

Existing home sales rose 4.8% during November, the second consecutive monthly gain. The recent pick-up reflects the temporary dip in mortgage rates in the late summer. All told, existing home sales continue to run at a slow pace as buyers contend with elevated financing costs, high home prices and scarce supply. The 4.15 million-unit pace of resales in November is 37% below the peak reached in 2021 and on par with the low hit during the throes of the pandemic in May 2020.

With the 25 basis point cut at the December FOMC meeting, the Federal Reserve has now reduced the fed funds target range by 100 basis points. However, mortgage rates have shot up over the past several months and are currently hovering near 7%, close to the level registered before the Fed first began to ease policy in September. Mortgage rates mostly follow long-term Treasury yields, which have stepped up recently alongside expectations for a more cautious pace of monetary easing moving forward on account of increased election-related policy uncertainty, stalled inflation progress and still-solid pace of economic growth. Although a sturdy macroeconomic backdrop should prevent a material retrenchment in activity, the high rate environment is likely to persist and further challenge the residential sector.

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