November home sales exceeded expectations, driven by a drop in mortgage rates.

 Sales increased by 6.1% compared to November 2023, marking the third-highest growth rate of the year and the largest annual increase in three years.

Single family homes in a residential neighborhood in San Marcos, Texas.

Dec. 19, 2024, 10:42 PM GMT+6

Sales of previously owned homes increased by 4.8% in November compared to October, according to the National Association of Realtors (NAR). This brought the seasonally adjusted, annualized rate to 4.15 million units.

November’s sales were 6.1% higher than a year ago, marking the third-fastest sales pace of 2024 and the largest annual gain in three years.

These numbers are based on closings, indicating contracts were likely signed in September and October, when mortgage rates had dropped to an 18-month low, before rising sharply in October.

“Home sales momentum is building,” said Lawrence Yun, chief economist for the NAR. “More buyers have entered the market as the economy continues to add jobs, housing inventory increases from last year, and consumers adjust to the new normal of mortgage rates between 6% and 7%.”

The number of homes available for sale at the end of October reached 1.33 million units, up 17.7% from November 2023. At the current sales pace, this represents a 3.8-month supply, with a balanced market typically considered to have a 6-month supply.

Limited housing inventory continues to push up prices. The median sale price in November was $406,100, marking a 4.7% increase from a year earlier. Price increases were especially strong in the Northeast and Midwest, at 9.9% and 7.3%, respectively. Approximately 18% of homes sold for more than their listing price.

First-time homebuyers made up 30% of November sales, up from 27% in October but slightly lower than the previous year. Cash buyers remained dominant, representing 25% of transactions. Meanwhile, investor activity declined to 13% of sales, down from 18% in November 2023.

“Is this an indication that investors believe home prices have peaked, or is it because rent increases have slowed?” Yun asked.

Sales of higher-priced homes saw the largest gains. Sales of homes priced over $1 million rose by 24.5% compared to November 2023, while sales of homes priced under $100,000 dropped by 24.1%.

Mortgage rates have surged once again, with the average rate on a 30-year fixed mortgage rising by 21 basis points on Wednesday after the latest Federal Reserve meeting. Fewer rate cuts are expected in 2025.