Why did existing home sales grow with higher mortgage rates?

Some people might have been surprised by existing home sales growth for the last two months, but they would have known what was happening if they followed our weekly Housing Market Tracker data.

Not only has sales data improved, but home prices have firmed up so much that months ago, I believed my forecast for national home price growth of 2.33% for 2024 would come in too low. On a year-over-year basis, the NAR median sales price index has been growing higher for three months in row. 

From NAR: Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – improved 4.8% from October to a seasonally adjusted annual rate of 4.15 million in November. Year-over-year, sales bounced 6.1% (up from 3.91 million in November 2023).

The charts below provide context for four data sets included in this report. Housing inventory has decreased, as is typical for this time of year. We saw a decline in active listings from 1.37 million to 1.33 million, and monthly supply was down from 4.2 months to 3.8 months. However, we are seeing improvements compared to the depressed inventory levels experienced in 2022, which is encouraging.

How did we get here?

1. Purchase application data grew

I don’t think many people track purchase applications the way I do. I consistently analyze the data every week to identify trends in demand. In my experience, it’s important to have around 12 to 14 weeks of positive, forward-looking purchase application data to yield valuable insights. Earlier this year, when interest rates were falling, we had that kind of data.

When mortgage rates started falling in mid-June, here’s what purchase applications looked like:

12 positive prints 

5 negative prints

1 flat print

Purchase applications typically reflect sales activity 30 to 90 days in advance, which means the growth we observed should boost sales. Even more surprising is that, despite rising mortgage rates over the past 10 weeks, we still have a positive trend in forward purchase application data.

Last 10 weeks:

6 Positive

4 negative

However, going out, we aren’t working from a record low level anymore, so be mindful of that in the future.

2. Weekly pending contracts improved as well

When you observe an increase in weekly purchase applications alongside a rise in weekly pending contract data compared to previous periods, it indicates that demand is growing. Our tracker data reflects these two trends and when you connect the dots, you can see that the pending contract data has been improving since October.

Our weekly Housing Market Tracker is designed to reflect current and anticipated demand. This way, we can quickly identify any changes in housing before they appear in traditional channels, which may use outdated data.You can read the latest report right here.