Sales of previously owned U.S. homes unexpectedly rose in November, led by a pickup in the South and representing a respite in a two-year downturn caused by higher borrowing costs and a lack of inventory.

Contract closings increased 0.8% from a month earlier to a 3.82 million annualized rate, still near the lowest since 2010, according to National Association of Realtors data released Wednesday. The median forecast in a Bloomberg survey of economists called for a 3.78 million pace. 

Purchases were down 7.7% from a year ago on an unadjusted basis.

A mix of still-high borrowing costs and elevated prices has stymied buyers and sellers alike in the resale market, with the NAR’s affordability index sliding to a record low in the third quarter. While financing costs have declined recently, with 30-year mortgage rates falling below 7%, borrowing costs are still twice as high as they were two years ago.

That’s dissuaded homeowners, who are locked in at much-lower rates, from listing their properties. With existing inventory lacking, builders are picking up the slack and offering generous incentives to satisfy demand. Residential housing starts surged in November to a six-month high, government data showed Tuesday. 

“The latest weakness in existing-home sales still reflects the buyer bidding process in most of October when mortgage rates were at a two-decade high before the actual closings in November,” Lawrence Yun, NAR’s chief economist, said in a statement. Still, “a marked turn can be expected as mortgage rates have plunged in recent weeks.”

Yun said on a conference call with reporters that home resales have likely reached their cyclical low point. Still, “we may not see any meaningful recovery for two or three months” in response to the recent decrease in mortgage rates, he said.

The number of previously owned homes for sale dropped to 1.13 million. At the current sales pace, it would take 3.5 months to sell all the properties on the market. Realtors see anything below five months of supply as indicative of a tight resale market.

The median selling price increased 4% from a year ago, the most since November 2022, to $387,600. NAR data showed 62% of homes sold were on the market for less than a month. Homes stayed on the market an average of 25 days in November, compared with 23 days a month earlier. 

Existing-home sales account for the majority of purchases and are based on contract closings. Data on new-home sales, which reflect contract signings, are due on Friday. 

Digging Deeper
• Sales rose in two of four regions, led by a 4.7% advance in the South—the largest U.S. region. Purchases also climbed in the Midwest, but dropped in the West to a record low.

• Single-family home sales increased 0.9% to a 3.41 million annual pace. Condominium and co-op sales were flat.

• First-time buyers made up a 31% of purchases, up from 28% in the prior month.

• Cash sales represented 27% of total sales. Investors, who often purchase with cash and are therefore less impacted by mortgage rates, made up 18% of the market.

This article was provided by Bloomberg News.