Last month was not only high in Christmas spirit and morale, it also included an increase in mortgage rates. According to the latest Ten-X Residential Real Estate Nowcast, existing home sales have seen a month-over-month decrease, which due to rising mortgage rates.
December sales will fall between seasonally adjusted annual rates of 5.33 and 5.69 million, with a targeted number of 5.51 million, which is down 1.8 percent from November, but a 0.9 percent increase from 2015, according to Ten-X.
Rick Sharga, EVP of Ten-X, attributed the decline in home sales to the rising mortgage rates, which are expected to average at about 4 percent this year. “It's possible that we're seeing the effect of rising mortgage rates slowing down existing home sales,” he said. “It's also possible that we may see the numbers trend upwards as buyers decide to enter the market before interest rates go even higher. All things considered, 2016 has been a remarkably good year for both existing and new home sales. We've seen year-over-year sales increases despite home prices appreciating more rapidly than wage growth, tight credit and limited supply. Clearly, demand remains fairly strong.”
The National Association of Realtors (NAR) reported that November existing home sales saw an increase to a seasonally adjusted rate (SAAR) of 5.61 million units in November, which validated the predictions from the previous Ten-X Nowcast. The increase marked a 0.7 percent gain from the descending 5.57 million October estimate and a 15.4 percent year-over-year increase.
As demand increased, the median price of existing homes continued to increase as well. NAR also reported a 6.8 percent year-over-year increase in median existing home prices to $234,900 in November, which marked 57 consecutive months of annual gains. Ten-X is predicting that median existing-home prices will decrease between $221,679 and $245,013 in December with a target price point of $233,346, which is down 0.7 percent from November, but a 4.1 percent increase from 2015.
Ten-X Chief Economist Peter Muoio explained that the housing market is gaining momentum thanks to various factors, but there is room for growth. “As we round out 2016, the U.S. housing market continues to benefit from a strong labor market, as solid job gains, low unemployment and promising wage growth fuel a high level of underlying demand for homes,” he said. “While there are still headwinds to sales growth in the way of tight inventory, low affordability and the likelihood of mortgage rate increases, solid fundamentals continue pointing to the overall health of the housing market.”