Implications: Existing home sales eked out a small gain in November to hit a nine-month high, though overall activity continues to trudge along at a disappointing pace. The current sales rate of 4.130 million remains near the lowest since the aftermath of the Great Financial Crisis, and well below the roughly 5.250 million annual pace pre-COVID (let alone the 6.500 million pace during COVID).  That said, affordability has been improving in several notable ways. First, 30-year mortgage rates have been trending lower since May and now sit around 6.3%, near the lowest rate since 2023. Meanwhile, the median price of an existing home is up just 1.2% versus a year ago. Aggregate wage growth (hourly earnings plus hours worked) has also begun to consistently outpace median home price gains over the past year for the first time since 2023, which improves affordability. In addition, inventory growth continues although at a slower pace than earlier this year. The months’ supply of homes (how long it would take to sell existing inventory at the current very slow sales pace) remained at 4.2 in November, a considerable improvement versus the past few years, though still below the benchmark of 5.0 that the National Association of Realtors uses to denote a normal market.  However, challenges remain, including that many existing homeowners remain reluctant to sell due to a “mortgage lock-in” phenomenon, after buying or refinancing at much lower rates before 2022.  It looks like potential buyers will have to continue to deal with limited options which will be a headwind to sales.  Existing home sales also face significant competition from new homes, where in many cases developers are buying down mortgage rates to compete and move inventory. Despite these cross currents, underlying fundamentals have improved recently, which should contribute to a modest upward trend in sales in 2026. On the manufacturing front, the Kansas City Fed Manufacturing Index, a measure of factory sentiment in that region, declined to +1 in December from +8 in November.

Click here for a PDF version