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Economic Report: U.S. existing home sales rise in November to highest level in ten months

The numbers: U.S. existing-home sales rose 1.9% to a seasonally adjusted annual rate of 6.46 million in November, the National Association of Realtors said Wednesday. That is the third straight monthly gain and the highest level since January. Compared with November 2020, home sales were down 2%.

Economists polled by The Wall Street Journal had expected an increase to 6.5 million units.

Key details: On a regional basis, the southern states are seeing the most gains. Sales rose 2.9% in the South, and 2.3% in the West. Sales were up a slight 0.7% in the Midwest and were unchanged in the East.

The median price for an existing home sold in November was $353,900, an increase of 13.9% over the past year.

There were 1.11 million homes available at the end of November, down 13% on a year-on-year basis.

Unsold inventory was at a 2.1 month supply in November, the lowest since January. That’s down from 2.3 in the same month last year.

Big picture: For now, existing sales have momentum, with sales up 10% over the first eleven months of 2021. Economists say the future trajectory of sales will largely depend on the supply of listings buyers have to choose from.

“Inventories have declined over the last three months, but they are off record lows,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, noted in a recent report, adding that prices, while high, have also moderated.

With inventory so limited, buyers simply have few options, putting a ceiling to the number of sales that can close each month. Survey data from Realtor.com suggests that the number of homeowners who plan to sell their property will increase in the early part of 2022. Should that come to fruition, it would grease the market’s wheels.

Meanwhile, rising mortgage rates could push buyers into the market in the short-run but also add worries for the sector over the longer-run.

What the NAR is saying: “Mortgage rates are expected to jump in 2022, but I don’t expect the imminent increase to be overly dramatic,” said Lawrence Yun, chief economist at the NAR. Sales are expected to decline next year due to higher interest rates from the Fed, he added.

What economists said: “The housing sector has staged an impressive rebound in the fourth quarter, after two quarters of back-to-back declines. The positive momentum continued in November, with existing home sales increasing by 1.9% month over month.. While the increase was shy of expectations, it was a solid report nonetheless,” said Aneta Markowska, chief economist at Jefferies. 

Market reaction: Stocks DJIA, +0.49% SPX, +0.75% moved higher on Wednesday in a week of volatile trading.

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