November Existing Home Sales, December Mortgage Apps
Existing Home Sales Gain for Third Consecutive Month, December Apps Looking Softer
- Existing Home Sales increased by 5.6 percent in November, to a 5,810,000 unit annual rate.
- Mortgage Applications for the week ending December 15 fell by 4.9 percent.
Existing home sales surged in November according to the National Association of Realtors, capping three consecutive monthly gains. Sales increased by 5.6 percent, to a 5,810,000 unit annual rate. This was the strongest sales rate since the economic recovery began in July 2009. The Midwest saw the biggest gain, up 8.4 percent for the month, followed by the South at 8.3 percent and the Northeast at 6.7 percent. The West saw a 2.3 percent decline in existing home sales in November. The months’ supply of existing homes on the market dipped to a very tight 3.4 months’ worth. In November, the median sales price of an existing home was up by 5.8 percent over the previous 12 months. Tight supply will keep upward pressure on house prices this winter.
We expect the single-family housing market to continue to grow through 2018. However, there is a complex mix of forces acting on it. Job and wage gains, consumer confidence and increasing household wealth are expected to be positives through next year. Rising mortgage rates will be a small-to-moderate negative. Tax reform is a complex case. Lower federal tax bills for most U.S. households will be a positive for real estate markets. However, the lower limit of the mortgage deduction, plus the limit on state and local tax deductions, may be a small-to-moderate headwind in some areas. About 94 percent of homeowners have mortgages of less than $750,000 and 95 percent pay less than $10,000 in property taxes, according to the NAR. So, tax reform items specific to housing will not be an issue for the strong majority of U.S. households.
Total mortgage applications fell by 4.9 percent for the week ending December 15, following a 2.3 percent drop the week before. Purchase apps fell by 5.5 percent, while refi apps were down by 3.2 percent. Solid mortgage activity in November looks like it will be followed by a weaker December. According to the Mortgage Bankers Association, the rate for a 30-year fixed rate mortgage eased to 4.16 percent. We expect that to gradually increase through 2018.
Market Reaction: U.S. equity markets are mixed. The 10-year Treasury bond yield is up to 2.47 percent. NYMEX crude oil is up to $57.49/barrel. Natural gas futures are down to $2.62/mmbtu.
This will be our last Comerica Economics publication of the year.
Happy Holidays and we will see you in 2018!
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For a PDF version of this report click here: Existing_Home_Sales_12202017
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