November existing home sales came in at a rate of 5.61 million seasonally adjusted annualized (SAAR). That’s the strongest rate since 2007.

The Wall Street Journal reports U.S. Existing-Home Sales Rose in November to New Postcrisis High.

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.

Prices continued to rise in November as inventory continued to fall. “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.

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.

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.

I wonder how much of this buying is based on the notion: Better buy now before rates go up.

Existing home sales will likely lift 4th quarter GDP estimates a bit, but then what?

Rate hikes reduce affordability so more than a bit of a slowdown is in store.

Mike “Mish” Shedlock