By Ben Leubsdorf and Josh Mitchell
WASHINGTON -- Homebuying activity increased in November for a third straight month to the strongest sales pace in nearly a decade, but rising prices and mortgage rates could restrain sales headed into 2017.
Sales of previously owned homes, which account for the vast majority of U.S. purchases, rose 0.7% from October to a seasonally adjusted annual rate of 5.61 million last month, the National Association of Realtors said Wednesday. That was the strongest monthly reading since February 2007.
Economists surveyed by The Wall Street Journal had expected sales would decline in November to a 5.54 million annual pace. October's sales pace was revised down to 5.57 million from an earlier estimate of5.60 million.
Sales last month were up 15.4% compared with the same month a year earlier. The annual gain was exaggerated by a one-off plunge in sales during November 2015 that the NAR had blamed on new federal mortgages rules delaying closings.
Prices continued to rise in November as inventory continued to fall. At the current sales pace, it would take just 4.0 months to exhaust the supply of existing homes on the market. The median sales price last month was $234,900, rising 6.8% from a year earlier.
"Inventory is short and still shrinking," said Lawrence Yun, the trade group's chief economist.
First-time home buyers represented 32% of November sales. Some 21% of sales last month were all-cash deals. Distressed sales--foreclosures and short sales--accounted for 6% of last month's purchases, the Realtors group said.
News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.
The U.S. housing sector continued its long recovery this year following the housing bubble, financial crisis and 2007-09 recession.
But rising prices, tight inventory and the recent jump in mortgage rates--if sustained--could act as headwinds for the market headed into 2017 and as the spring buying season approaches.
"We do expect some tapering off of home sales in 2017," Mr. Yun said.
Permits issued for new housing units were up 1.1% in the first 11 months of the year compared with the same period in 2015, with solid growth for single-family homes offset by weakness in the multifamily segment, the Commerce Department said last week.
Sales of newly built single-family homes, which account for roughly 10% of U.S. home purchases, rose 12.7% in the first 10 months of 2016 compared with a year earlier, according to Commerce Department data.
But after years of low interest rates that have supported homebuying activity and price growth, borrowing costs have climbed sharply since the Nov. 8 presidential election.
The Federal Reserve has also moved forward with its plan to gradually boost short-term interest rates as a tightening labor market is expected to put upward pressure on inflation. The U.S. central bank last week raised its benchmark federal-funds rate for just the second time since the crisis.
The average rate on a 30-year fixed-rate mortgage in November was 3.77%, up from 3.47% the prior month, according to Freddie Mac. Rates have risen further in December, with Freddie Mac reporting last week that the average was 4.16%, the highest weekly reading since October 2014.
Write to Ben Leubsdorf at email@example.com and Josh Mitchell at firstname.lastname@example.org
(END) Dow Jones Newswires
December 21, 2016 10:18 ET (15:18 GMT)
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