Kiplinger Housing Outlook: Existing-home Sales Increase for Second Straight Month
But with prices high and mortgage rates rising, a sustained recovery is not in sight.
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Home-price growth continues to slow down. The S&P CoreLogic Case-Shiller U.S. National Home Price Index, which measures the price of existing homes across the nation, rose 3.6% in October from a year earlier, down from a 3.9% annual pace in the previous month. On a month-over-month, seasonally adjusted basis, home prices rose 0.3% in October. A limited supply of existing homes for sale is supporting continued price appreciation, but low housing affordability is weighing on the pace of price increases. Borrowing costs are likely to stay elevated at around 7% over the next few months, which means that both buyers and sellers will continue to deal with challenging conditions in the housing market.
Residential construction fell for the third consecutive month. Total housing starts fell 1.8%, to 1.289 million annualized units in November. Single-family starts rose 6.4%, while multifamily starts plummeted 24% during the month. The regional data show that the South bounced back after a slowdown in residential construction caused by Hurricane Milton. Starts in the South increased by 10%. Other regional data were mixed, with starts increasing in the Northeast but falling in the West and Midwest. Single-family permits rose 0.1%, while multifamily permits rose 19%. The low inventory of existing homes should continue to encourage new construction of single-family homes, albeit at a slower pace. Meanwhile, multifamily construction will remain weak over the next few months as builders focus on completing projects, since rising apartment vacancies and elevated borrowing costs discourage new developments.
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New-home sales rose modestly in November, up 5.9% to a seasonally adjusted annual rate of 664,000 units. The new-home market continues to benefit from a tight supply of existing homes for sale and builder incentives that help make homes more affordable for buyers. The supply of new homes for sale rose 8.9% from a year ago. At the current sales pace, that inventory would last 8.9 months.
Existing-home sales are still struggling, despite another monthly increase in November. Sales of previously owned homes rose 4.8% to 4.15 million annualized units. Existing-home sales continue to run at a slow pace, as buyers contend with elevated financing costs, high prices and limited inventory. The total inventory of existing homes on the market rose 17.7% from a year ago. This translates to just 3.8 months of supply at the current sales pace, down from 4.2 months in October. Relatively low sales levels in 2024 showed that affordability concerns are undercutting demand for existing homes. The modest drop in mortgage applications in December, which is usually a bellwether for future home sales, suggests the second consecutive monthly sales increase in November isn’t likely to be the beginning of a recovery. Mortgage rates have started rising again, with the average 30-year fixed mortgage rate now at 6.91%.
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Rodrigo Sermeño covers the financial services, housing, small business, and cryptocurrency industries for The Kiplinger Letter. Before joining Kiplinger in 2014, he worked for several think tanks and non-profit organizations in Washington, D.C., including the New America Foundation, the Streit Council, and the Arca Foundation. Rodrigo graduated from George Mason University with a bachelor's degree in international affairs. He also holds a master's in public policy from George Mason University's Schar School of Policy and Government.
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