The National Association of Realtors reported Wednesday that existing-home sales increased 1.9 percent from the previous month to a seasonally adjusted annual rate of 6.46 million, the highest rate since January. November sales were down 2.0 percent year on year.
Existing-home sales are on track to have their best year since 2006, with sales up 10% from a year ago in the first 11 months of the year, according to the National Association of Realtors. Buyers were enticed to enter the market by low interest rates, higher household savings, and a desire for more space to work from home. A large influx of millennials entering their prime home-buying years fueled demand as well.
At the same time, the supply of available homes for sale fell to a record low at the start of the year and has remained significantly lower than normal throughout the year.
Home prices have risen as buyers compete for a limited number of available homes on the market. According to NAR, the median existing-home price increased 13.9 percent year on year in November to $353,900.
"Determined buyers were able to secure housing before mortgage rates rose further in the coming months," said Lawrence Yun, chief economist at the National Association of Realtors. Existing-home sales may slow next year if mortgage rates rise, he predicts.
The Wall Street Journal polled economists, who predicted a 2.5 percent monthly increase in sales of previously owned homes, which account for the majority of the housing market.
The holiday season, as well as cold weather in some parts of the country, tend to dampen home sales near the end of the year. However, activity has not slowed significantly in recent weeks. Buyers may have been in a hurry to buy before home prices rose further or interest rates increased, according to Doug Duncan, chief economist at Fannie Mae.
"In general, home sales have been stronger than we anticipated," he said.
Mortgage interest rates have risen slightly since the summer, but they remain well below pre-pandemic levels. According to mortgage finance giant Freddie Mac, the average rate on a 30-year fixed-rate mortgage was 3.12 percent as of December 16.
Officials at the Federal Reserve have indicated that interest rates could be raised as early as the spring of 2022.
Shoppers who were dissatisfied with the market this year and chose not to buy may return in 2022, according to real-estate agents, keeping demand high in the coming year.
The market is still moving quickly, and many homes are selling for more than their asking price. According to NAR, the average home sold in November was on the market for 18 days, which was unchanged from the previous month.
At the end of November, there were 1.11 million homes for sale, a 9.8 percent decrease from October and a 13.3 percent decrease from November 2020. At the end of November, there was a 2.1-month supply of homes on the market at the current sales pace.
According to real-estate brokerage Redfin Corp., the number of homes for sale in November fell to a record low on a seasonally adjusted basis.
"If you're halfway interested in [a home on the market], you've got to have your finger on the trigger ready to go," said Robbie Breaux, a Lafayette, La., real estate agent. "You have 50 people looking at the same three houses that everyone else is."
Jaime Vargas Cruz and James Matias decided to sell their three-bedroom house in Buffalo, New York, and buy a larger one after Mr. Vargas Cruz started a new job in customer service this summer. They listed their house in July and it sold within a week.
With a $250,000 budget, they looked for homes listed for less than $220,000 so they could make an offer above the asking price. "We knew those [listed at $250,000] would sell for $280,000 to $290,000," Mr. Vargas Cruz explained.
They accepted their fifth offer for around $260,000 and moved in last month.
"We are overjoyed," Mr. Vargas Cruz said. "This is definitely the house we want to grow into."
At lower price points, where buyers with limited cash can be outbid by investors or cash buyers, the market is especially competitive. According to the National Association of Realtors, approximately 24% of November existing-home sales were paid in cash, up from 20% the previous year.
The market's share of first-time buyers fell to 26%, the lowest level since January 2014, and down from 32% a year ago.
Existing-home sales increased the most month over month in the South, up 2.9 percent, and 2.3 percent in the West.
Because of the high demand, construction activity has increased. The Commerce Department reported last week that housing starts, a measure of home construction in the United States, increased 11.8 percent in November compared to October. Residential permits, which can be a leading indicator of future home construction, increased by 3.6 percent.
The Journal's parent company, News Corp, also operates Realtor.com under license from the National Association of Realtors.