Home sales plummeted by 35% in November but there are early signs that demand may be picking up.
Redfin’s latest data found that home sales dropped 35.1% YOY in November on a seasonally-adjusted basis. High buying costs kept both buyers and sellers on the sidelines.
“Rates have declined significantly over the past six weeks, which is helpful for potential homebuyers, but new data indicates homeowners are hesitant to list their homes,” Sam Khater, Freddie Mac’s Chief Economist, noted.
“Many of those homeowners are carefully weighing their options as more than two-thirds of current homeowners have a fixed mortgage rate of below four percent.”
Sellers have hesitated to put their homes on the market, knowing they’ll have to buy a new house with a higher interest rate without making the same sky-high profits many saw in 2021 and earlier this year.
Home price appreciation recorded a dip, with the median U.S. home-sale price up only 2.6% YOY. This is the smallest gain since May 2020.
Overall supply rose 4.6% YOY, however, driven by homes lingering on the market as demand remains down. The typical home spent 37 days on the market before it went under contract, up from 23 days last year.
Buyers are beginning to return to the market, suggesting the market may soon even out. Fewer home purchase agreements were canceled in November, and Redfin’s Homebuyer Demand Index increased.
New home sales bested expectations in November and beat out October’s numbers by more than 5%.
But the market still has a way to go. Redfin economists predicts home sales might pick up further in mid-January.
“We do anticipate that mortgage rates will decline slightly further in 2023 as the Fed’s actions continue to bring inflation down, which should ultimately bring more homebuyers back to the market. Still, we have a ways to go until we reach recovery mode, and we may see sales continue to ebb in the short term,” said Redfin Economics Research Lead Chen Zhao.
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