Existing home sales blow market away

November existing home sales shattered expectations, rising to a new record pace, and virtually sealing the deal on another record year for the U.S. housing market, Wachovia Securities economists reported to their customers. Sales rose to a seasonally adjusted annual rate of 6.94 million in November. Months of available supply held steady and sales prices rose.

"An improving employment situation, steady income growth, and stubbornly low interest rates proved too much for homebuyers to resist once again in November," Gina Martin, CFA, wrote. "Sales of existing homes posted a 2.7 percent month-over-month increase in November to a seasonally adjusted annual pace of 6.94 million, surprising the consensus of economic forecasters, who expected no gain from October's pace of sales. November's gain to a new record high rate of sales seals the deal for 2004 as the best ever year for the housing market."

Martin warned that rising rates would eventually cool things down. "Contrary to expectations, rates have fallen since their peak in June, adding a boost to housing market activity throughout the autumn months. We expect that long-term Treasury rates, and thus, conventional mortgage rates, will creep higher throughout 2005. This slow rise in rates is likely to at least marginally slow housing activity next year," she said.