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Overview
In November, the housing market experienced increased activity ahead of the typically slow holiday season. Both existing home sales and pending home sales saw an uptick, reflecting sturdy demand for housing, despite relatively high mortgage rates. Although the Federal Reserve implemented another cut to the Federal Funds Rate that month, it’s important to note that mortgage rates are more closely linked to the 10-year Treasury yield, which has been on the rise in the third quarter of 2024. Nonetheless, future rate cuts are expected to stabilize mortgage rates this year.
The U.S. labor market added more jobs than the monthly average over the past year. The consistent job growth, along with mortgage rates that remain below the historical national average of 7%, suggests that housing demand will persist through the end of the year and likely into the first quarter of 2025. The Pending Home Sales Index showed that contract signings increased across all U.S. regions, and the uptick in the Mortgage Bankers’ Association Purchase Index indicated that this activity would continue to rise in the next four to six weeks.
On the supply side, construction and housing starts were stagnant this month, compared to last month, and inventory levels decreased for the first time since the beginning of 2024. However, the rise in building permits for single-family homes signals that the housing supply will improve soon. Consumers adjusted to the “new normal” of 6%-7% mortgage rates as the new year started. More buyers are expected to enter the market as the economy adds more jobs and the housing supply increases.
In November 2024, the upper limit of the Federal Funds Rate was set at 4.75%, following a 0.25 percentage point cut that month. The Fed is expected to continue reducing the rate in the following months.
The U.S. labor market increased by 227,000 in November, trending up in health care, leisure and hospitality, government and social assistance. Payroll employment had increased by an average of 186,000 per month over the last 12 months. Construction jobs changed little in November.
Since the beginning of the year, inventory has been consistently increasing until November. The November inventory of unsold existing-homes slipped by 2.9% from the prior month to 1.33 million. The available inventory is equivalent to 3.8 months’ supply at the current monthly sales pace.
