According to a recent report by the National Association of Realtors (NAR), existing home sales in the United States rose in November on a month-over-month and year-over-year basis. The optimism surrounding the Fed rate cuts, mortgage rate stability and job market improvements drove the housing market.

Knowing the Numbers

On Dec. 19, NAR reported that existing home sales in November 2024 witnessed growth of 4.8% from October and 6.1% from the prior year, settling at a seasonally adjusted annual rate of 4.15 million. This month’s year-over-year gain was the largest since June 2021 (about 23%). The growth trend reflects that homebuyers are adjusting themselves to the new normal mortgage rate benchmark and the dropping Fed interest rates amid the sticky inflation rate.

The month-over-month increase in November’s numbers was driven by advanced sales trajectory in the Northeast, Midwest and South regions of the United States, even though sales in the West region remained flat. Notably, on a year-over-year basis, sales were up across all four regions of the country. The existing home sales in the Northeast, Midwest and South regions grew 8.5% to an annual rate of 510,000, 5.3% to 1 million and 5.6% to 1.87 million, respectively, compared with October 2024. Sales in the West region remained flat at an annual rate of 770,000. Year over year, existing home sales climbed in the Northeast by 6.3%, the Midwest by 5.3%, the South by 3.3% and the West by 14.9%.

That said, total housing inventory was 1.33 million units at the end of November, down 2.9% from October but up 17.7% from the comparable year-ago period’s level. According to NAR, it would take 3.8 months to exhaust the current inventory, down from 4.2 months in October, while up from 3.5 months in the prior-year period.

The median existing-home sales price (for all home types) in the month grew 4.7% year over year to $406,100, reflecting sales price hikes in all four regions of the United States. The decline in housing inventory compared with the growing housing demand is likely to have pushed the housing prices in the country.

Mortgage Rate Scenario

According to the mortgage finance agency Freddie Mac, the 30-year fixed-rate mortgage was 6.72% for the week concluded on Dec. 19, 2024. This fixed rate moved up 12 basis points (bps) from 6.60% at the week concluded on Dec. 12, 2024, and five bps from 6.67% on a year-over-year basis.

The first-time buyers registered 30% of sales in November, up from 27% in the prior month, while down from 31% reported in the year-ago month. Per NAR’s 2024 Profile of Home Buyers and Sellers (released November 2024), the annual share of first-time buyers was the lowest ever recorded at 24%.

At the NAR conference on Nov. 8, its chief economist, Lawrence Yun, said that the easing inflation will stabilize the mortgage rates but they are expected to remain elevated, reflecting the new normal 30-year fixed-rate mortgage range of 5.5-6.5%. He expects existing home sales to increase 9% in 2025 and 13% in 2026, however, the home sales trend depends on the consumers’ acceptance of the higher mortgage rates.

Our Take

The persisting sticky inflation scenario is stirring up the homebuilding industry. Moreover, the mortgage rates are currently ranging between an inflated benchmark, making it the new normal. These trends can be witnessed from the industry’s share price underperforming the broader sector and the Zacks S&P 500 composite in the year-to-date period.

Image Source: Zacks Investment Research

Nonetheless, the optimism surrounding the Fed rate cuts since September 2024 and the home buyers’ acceptance of higher mortgage rates, coupled with increased employment in the country, is set to benefit the housing market moving into 2025.

Homebuilders like Taylor Morrison Home Corporation TMHC, NVR, Inc. NVR and Tri Pointe Homes, Inc. TPH are banking on the macro tailwinds surrounding the housing market, as reflected in the year-over-year earnings per share estimate growth trajectory for 2025. Despite the ongoing inflationary risks, these homebuilding stocks are expected to experience growth in the near term.

3 Bundled Homebuilders to Watch

Taylor Morrison: This Arizona-based homebuilder and land developer currently carries a Zacks Rank #2 (Buy). The company’s shares have gained 12% year to date. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TMHC’s earnings per share (EPS) estimates for 2025 are expected to grow 11.2% year over year. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 11.5%.

NVR: Headquartered in Reston, VA, this homebuilder currently carries a Zacks Rank #3 (Hold). The stock has gained 18.3% year to date.

NVR’s EPS estimates for 2025 are expected to grow 7.4% year over year. The company’s earnings surpassed the consensus mark in two of the trailing four quarters and missed on the remaining two occasions, the average surprise being 2.6%.

Tri Pointe Homes: Based in Irvine, CA, this homebuilding company currently carries a Zacks Rank of 3. Shares of the company have gained 4.6% year to date.

TPH’s EPS estimates for 2025 are expected to grow 1.7% year over year. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 26.9%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

NVR, Inc. (NVR) : Free Stock Analysis Report

Tri Pointe Homes Inc. (TPH) : Free Stock Analysis Report

Taylor Morrison Home Corporation (TMHC) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research