Implications: Existing home sales surprised to the upside in November, rising for a third consecutive month to post their fastest pace since 2007. Sales of previously-owned homes rose 0.7% in November to a 5.61 million annual rate, up 15.4% from a year ago. Although it's important to remember that home sales are volatile from month to month, we expect the general upward trend of the past several years to keep going. That being said, tight supply and ever rising prices will continue to be headwinds heading into the new year. Remarkably, sales hit their highest level since 2007 even though inventories remain very low. Inventories have now fallen for eighteen consecutive months (on a year-over-year comparison basis). The months' supply of existing homes – how long it would take to sell the current inventory at the most recent selling pace – is only 4.0 months. According to the National Association of Realtors® (NAR), anything less than 5.0 months is considered tight supply. The good news is that demand for existing homes was so strong that 42% of properties in November sold in less than a month, pointing to eagerness from buyers. Higher demand has also driven up median prices, which are up 6.8% from a year ago and have now risen for the 57th consecutive month on a year-over-year basis. While this may temporarily price some lower-end buyers out of the market, it should ultimately help alleviate some of the supply constraints as "on the fence" sellers take advantage of higher prices and trade-up or trade-down to a new home. Although some analysts may be concerned about the impact of higher mortgage rates, it's important to recognize that rates are still low by historical standards, incomes are growing, and the homeownership rate is eventually going to move higher again.
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