The housing market is on track to end the year much like it began: with brisk sales but hardly anything to buy.
Sales of existing homes rose 1.9% from October to November, the third straight month of increases, hitting the fastest pace since January, the National Association of Realtors said in a report Wednesday. At the same time, the inventory of homes for sale fell 9.8% to the lowest level since April. At the current sales pace, the supply would last just 2.1 months—not far above the record low of 1.9 months seen in January, and well below the six-month supply that the association says goes along with moderate price increases.
The current housing market is a textbook case of supply and demand—lots of people want homes for space to live and work amid the telecommuting trend brought about by the pandemic, and there just aren’t that many of them for sale. As a result, prices have risen so rapidly that the market is starting to look an awful lot like a bubble by certain measures. On top of that, low mortgage rates have given buyers more purchasing power to bid prices up—though forecasters expect mortgage rates to increase over the next year. Yet, as steep as the price of entry for homeownership has been, it’s provided an attractive alternative to renting, which also has grown increasingly expensive.
“Determined buyers were able to land housing before mortgage rates rise further in the coming months,” said Lawrence Yun, the association’s chief economist, in the report. “Locking in a constant and firm mortgage payment motivated many consumers who grew weary of escalating rents over the last year.”
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