November Home Sales Forecast: Rising Rates, Cooling Markets?
- Zillow expects existing home sales to fall in November to 5.51 million units at a seasonally adjusted annual rate (SAAR)
- New home sales should fall 5.8 percent to 530,000 units (SAAR), the lowest number of new home sales since February.
November home sales data will be a critical test of the resiliency of the American housing market. After falling steadily for much of the past two years, mortgage rates rose in mid-November as markets responded to the results of the U.S. presidential election. By the end of the month, rates were about 50 basis points above where they stood in October.
Refinance mortgage originations are likely most vulnerable to rising rates, and purchase mortgage applications data suggest resilience in the purchase market. But there is little doubt that at least some home shoppers will delay or defer the decision to buy a home in response to rising rates. November home sales data will provide the first real signal of just how rate-sensitive American home buyers have become.
We expect existing home sales (as reported by the National Association of Realtors on Dec. 21) to fall 1.7 percent in November from October, to 5.51 million unit at a seasonally adjusted annual rate (figure 1). This would place existing home sales up 13.3 percent compared to last November – one of the strongest year-over-year gains of 2016. This figure is somewhat misleading, however: Some closings were likely delayed last October because of regulatory changes, which resulted in very low sales figures reported in November 2015 and exceptionally high numbers in surrounding months as closings were pushed forward or back.
Of course, rising rates is only one of the factors contributing to lower existing home sales. As has been the case for much of 2016, tight for-sale inventory is also contributing to relatively low sales numbers.
New home sales disappointed in October, and we expect another relatively low number of new home sales in November (the Census Bureau will report new home sales numbers Dec. 23). Our forecast points to a 5.8 percent monthly decline in new home sales in November, to 530,000 units (SAAR) (figure 2), a figure that would nevertheless represent a 4.4 percent year-over-year bump.
Looking out over the next year, out forecasts point to relatively flat existing and new home sales. For November 2017, we expect existing home sales to total 5.45 million units (SAAR), unchanged from our 12-month ahead forecast last month and toward the lower end of the range in which they have hovered for much of 2016. For new home sales, we expect 525,000 sales (SAAR) in November 2017.