Existing-home sales reach six-month high as market favors sellers

The housing market has seen a shift in dynamics as more homebuyers enter the scene, leading to a favorable position for sellers. Existing-home sales have reached a six-month high, with 4.15 million homes sold, marking an increase of about 4.8% from October and a significant 6.1% rise compared to the previous year.

Despite this seller advantage, there are signs that the market is moving towards equilibrium. Data from Realtor.com indicates that active listings have increased by over 23% in mid-December compared to last year, and new listings continue to grow robustly.

Home prices remain elevated despite some weakness in listing prices compared to home sales prices. Homeowners are benefiting financially, with home equity reaching $35 trillion in the third quarter, the second-highest level recorded.

Shelter inflation remains a concern for many Americans, highlighted by the latest rental report showing a decline in market asking rents for the 16th consecutive month in November. Despite these decreases, rents are only 3.8% below their peak in 2022.

The report also reveals challenges faced by minimum-wage workers who must work additional hours to afford rent in most markets, especially acute in New York City where the minimum wage is set to rise on January 1.

Construction data for November showed mixed results. While permitting activity stays high, actual starts have decreased, particularly for multifamily constructions. However, single-family completions have continued to increase slightly, offering more new supply for buyers.

A significant economic update came from the Federal Reserve’s Open Market Committee meeting where it was announced that "the Fed cut its funds rate," aligning with expectations. Chairman Jerome Powell indicated fewer rate cuts and higher rates anticipated for 2025 and 2026.

Mortgage rates saw an uptick this week and may continue to rise as markets respond to updates from the Fed. Nonetheless, a decline is anticipated by 2025 according to Realtor.com's forecast.

Additionally, a study by Realtor.com found an increase in extra or guest bedrooms due to larger homes and shrinking household sizes across America. Lower-cost housing markets typically offer more extra bedrooms than high-cost ones.