December 21, 2022 Reading Time: 4 minutes

Sales of existing homes sank another 7.7 percent in November to a 4.09 million seasonally adjusted annual rate. That is the tenth consecutive monthly decline leaving the selling pace at the lowest level since May 2020, the low of the lockdown recession. Excluding the lockdown recession, sales were at their lowest since November 2010. Sales were down 35.4 percent from a year ago and 38.5 percent from the January 2021 peak.

Sales in the market for existing single-family homes, which account for about 89 percent of total existing-home sales, dropped 7.6 percent in November, coming in at a 3.65 million seasonally adjusted annual rate (see first chart). Sales are down 35.2 percent from a year ago and 38.1 percent from the January 2021 peak. Single-family sales also fell for the tenth consecutive month and were at their slowest pace since November 2010, below the May 2020 lockdown recession low.

The single-family segment saw sales decline in all four regions. Sales fell by 5.9 percent in the Midwest, 6.4 percent in the Northeast, the smallest region by volume, 7.4 percent in the South, the largest region by volume, and 11.4 percent in the West. Sales were down double-digits in all four regions from a year ago (-45.6 percent in the West, -34.5 percent in the South, -30.4 percent in the Midwest, and -29.0 percent in the Northeast).

Condo and co-op sales fell 8.3 percent for the month, leaving sales at a 440,000 annual rate for the month versus 480,000 in October (see first chart). Measured from a year ago, condo and co-op sales were off 37.1 percent and were at their slowest pace since May 2020, the low following the lockdown recession. Excluding the lockdown recession, sales were at the slowest pace since July 2011. Condo and co-op sales were down in three of the four regions in November, falling 4.5 percent in the South, 10.0 percent in the Northeast, and 20.0 percent in the West, but were unchanged in the Midwest. From a year ago, sales were also down in all four regions (-46.7 percent in the West, -38.2 percent in the South, -33.3 percent in the Midwest, and -25.0 percent in the Northeast).

The total inventory of existing homes for sale fell in November, decreasing by 6.6 percent to 1.14 million, leaving the months’ supply (inventory times 12 divided by the annual selling rate) at 3.3, matching the highest level since June 2020, but still low by historical comparison.

For the single-family segment, inventory was down 6.5 percent for the month at 1.01 million but is 5.2 percent above the November 2021 level (see second chart). The months’ supply was 3.3, unchanged from the prior month and matching the highest since June 2020 (see second chart). The months’ supply for new single-family homes for sale was 8.9 in November, well above the months’ supply of existing homes (see second chart).

The condo and co-op inventory decreased 8.8 percent to 125,000, leaving the months’ supply at 3.4.  Condo and co-op months’ supply is 30.8 percent above November 2021.

The not-seasonally-adjusted median sale price in November of an existing home was $370,700, 3.5 percent above the year-ago price. For single-family existing home sales in November, the price was $376,700, a 3.2 percent rise over the past year (see third chart). The median price for a condo/co-op was $321,600, 5.8 percent above November 2021. On a 12-month average basis, the sale price of existing single-family homes may be plateauing (see third chart).

Mortgage rates have eased back recently, falling to around 6.3 percent in late December from a peak slightly above 7.0 percent in mid-November, but still well above the lows of around 2.65 percent in January 2021 (see third chart).

The combination of near-record-high home prices and sharply higher mortgage rates has sent housing affordability plunging. The Housing Affordability Index from the National Association of Realtors measures whether or not a typical family could qualify for a mortgage loan on a typical home. A typical home is defined as the national median-priced, existing single-family home as calculated by NAR. The typical family is defined as one earning the median family income as reported by the U.S. Bureau of the Census. A value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20% down payment. As of October, the index stood at 91.2, below the qualifying threshold and the lowest since August 1985 (see fourth chart).

Housing is likely to continue to be under intense pressure as near-record-high prices and surging mortgage rates reduce affordability and push more and more buyers out of the market.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.

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