Home sales, which account for about 90% of U.S. home sales, finally cooled off in November! But it wasn’t because buyers left the market; rather, it was because a shortage of supply pushed up home sales prices, and the lower the budget, the less buyers could buy a home.
On Tuesday, December 22, according to the National Association of Realtors (NAR), the quarterly annualized total of U.S. home sales fell 2.5% to 6.69 million this November, down from the previous value of 6.86 million in October to a new fifteen-year high set in November 2005.
This was the first year-over-year decline since May of this year, after five consecutive months of year-over-year gains, and missed market expectations for a 2.2% decline to 6.7 million households. The figure rose 25.8% year-over-year, slowing from October’s year-over-year gain of 26.6%.
Lawrence Yun, chief economist at NAR, said the presence of too many buyers in the U.S. second-home market relative to sellers “may have been the main reason for the year-over-year sales decline in November.”
The median home sale price rose 14.6 percent year-over-year in November, up 105 months in a row to $310,800, recording four consecutive months of double-digit year-over-year gains, though it fell back from the $331,000 recorded in October, when it had hit an all-time high for five consecutive months since records began in 1968, and in June when the median U.S. home sale price broke through the $300,000 mark for the first time.
Also from June, U.S. home prices rose mainly due to a shortage of supply. A total of 1.28 million homes were listed for sale at the end of November, the lowest since 1982, down 10% from 1.42 million in October and down 22% from 1.64 million in November 2019, a year-over-year decline of 18 months in a row.
At the current pace of sales, the November inventory of manufactured homes will sell out in 2.3 months, breaking the all-time low level set in September and October since data was recorded in 1982. The market generally considers a sell-out period of less than five months to be a “tightening on the supply side” and six to seven months to be a “healthy balance between supply and demand. Homes for sale remained on the market for an average of 21 days, an all-time low, compared to 38 days a year ago.
Of the four major geographic regions in the U.S., only the West was flat in November, while the other three regions were down. But some analysts say the surge in the new crown epidemic may have had a negative impact on this, such as the 15.8 percent year-over-year increase in home sales in the Midwest state of Minnesota, which is below the national average and significantly below the 28.9 percent year-over-year growth rate in October, which happens to be the epicenter of the resurgent epidemic.
Lawrence Yun noted in a public statement that the November drop in home sales may be due to the fact that home prices have risen too quickly and new jobs have begun to stagnate in recent months, eroding consumer confidence as a result, though there is no particular cause for concern.
Affordability for first-time homebuyers is being challenged, but the U.S. housing market will continue to grow strongly through 2021 as a new round of fiscal stimulus lands and new crown vaccines begin to be distributed, as well as strong demand for homeownership.
In fact, the number of new secondary homes listed for sale increased by about 10% year-over-year in mid-November, but the robust demand side is rapidly absorbing the new supply. Some analysts say it is the growing imbalance between supply and demand that is causing home prices to rise faster than is healthy for the market.
The higher the median home price grows, the more active the U.S. high-end housing market is, as November data show that sales of manufactured homes priced under $100,000 fell 22 percent year-over-year, sales between $100,000 and $250,000 rose 2 percent year-over-year, and sales of high-end homes between $750,000 and $1 million jumped 85 percent year-over-year. This represents that buyers with lower budgets may soon be squeezed out of the market.
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