WASHINGTON (Reuters) - U.S. existing home sales unexpectedly rose in November, but further gains as mortgage rates retreat from 23-year highs could be limited by a chronic shortage of houses on the market.
Existing home sales increased 0.8% last month to a seasonally adjusted annual rate of 3.82 million units, ending five straight monthly decreases, the National Association of Realtors said on Wednesday.
Home resales are counted at the closing of a contract. November's sales likely reflected contracts signed in the prior two months, when the average rate on the popular 30-year fixed-rate mortgage jumped to levels last seen in 2000.
Economists polled by Reuters had forecast home sales would fall to a rate of 3.77 million units. Sales rose in the densely populated South and the Midwest, which is considered the most affordable region. They fell in the Northeast and West.
Home resales, which account for a large portion of U.S. housing sales, dropped 7.3% on a year-on-year basis in November.
The rate on the popular 30-year fixed-rate mortgage averaged 6.95% last week, the lowest level since August and down from 7.03% in the prior week, according to data from mortgage finance agency Freddie Mac. It has tumbled from a 23-year high of 7.79% in late October, tracking the decline in U.S. Treasury yields.
"A marked turn can be expected as mortgage rates have plunged in recent weeks," said Lawrence Yun, the NAR's chief economist.
The Federal Reserve held interest rates steady last week and signaled in new economic projections that the historic tightening of monetary policy engineered over the last two years is at an end and lower borrowing costs are coming in 2024.
The government reported on Tuesday that single-family housing starts and permits increased to 1-1/2 year highs in November, which could help to ease the inventory squeeze.
There were 1.13 million previously owned homes on the market last month, up 0.9% from a year ago, but well below the nearly 2 million units before the COVID-19 pandemic. At November's sales pace, it would take 3.5 months to exhaust the current inventory of existing homes, up from 3.3 months a year ago.
A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
With supply still tight, multiple offers remained a feature in some areas, keeping home prices elevated. The median existing home price increased 4.0% from a year earlier to $387,600 in November.
Properties typically stayed on the market for 25 days in November, up from 24 days a year ago. Sixty-two percent of homes sold in November were on the market for less than a month.
First-time buyers accounted for 31% of sales, compared to 28% a year ago. That share is well below the 40% that economists and realtors say is needed for a robust housing market. All-cash sales accounted for 27% of transactions, up from 26% a year ago.
Distressed sales, including foreclosures, represented only 1% of transactions, virtually unchanged from the prior year.