US existing home sales rise to near 10-year high

* Existing home sales increase 0.7 percent in November

* Supply of houses on the market falls 8.0 percent

* Median house price rises 6.8 percent from year ago

WASHINGTON, Dec 21 (Reuters) - U.S. home resales unexpectedly rose in November, reaching their highest level in nearly 10 years, likely as buyers rushed into the market to lock in low interest rates in anticipation of further increases in borrowing costs.

The third straight monthly increase in existing home sales, reported by the National Association of Realtors on Wednesday, suggested housing would contribute to economic growth in the fourth quarter after being a drag in the previous two quarters.

Existing home sales increased 0.7 percent to an annual rate of 5.61 million units last month, the highest sales pace since February 2007. October's sales pace was revised down to 5.57 million units from the previously reported 5.60 million units.

Economists had forecast sales slipping 1.0 percent to a 5.50 million-unit pace in November. Sales were up 15.4 percent from a year ago. They rose in the Northeast and South, but fell in the Midwest and West last month.

RELATED: 10 real estate accounts to follow:

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10 real estate accounts to follow
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10 real estate accounts to follow

Illustrated Properties
@illustratedproperties
Based in Palm Beach Gardens, FL, this account exclusively features current listings (including prices) of mansions with pools. A fine display of true and massive Floridian architecture.

Photo credit: Instagram


 

Saunders & Associates
@hamptonsrealestate
Because who wouldn't rather be at a beachfront estate in the ever-glamorous Hamptons?

Photo credit: Instagram

MSM Luxury Estates
@msmluxuryestates
Based in Beverley Hills, CA, celebrity homes are often featured, as are infographics including statistics on the current market. 

Photo credit: Instagram

Joyce Rey Real Estate
@joycereyrealestate
Featuring estates everywhere from California to Italy, prime luxury pads are accompanied by shots of pretty decor, quotes and personal moments from Joyce Rey's glamorous life. 

Photo credit: Instagram

Houlihan Lawrence
@houlihanlawrence
The real estate firm that specializes in Westchester County and the suburbs of northern NY posts listings in real time, as well as shots of hip and marketable hotspots in the towns where they sell.

Photo credit: Instagram

Chad Carroll
@chadcarroll
This "Million Dollar Listing: Miami" star posts pictures and listings showcasing all of Miami's architectural beauty, from rooftop views to sleek interiors.

Photo credit: Instagram

Douglas Elliman
@douglaselliman
As one of the most prestigious real estate companies in the world, it's no surprise that this account is full of all things luxurious, including cityscapes, events, and famous landmarks.

Photo credit: Instagram

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Mortgage rates have surged in the wake of Donald Trump's victory in the Nov. 8 presidential election. Trump's proposal to increase infrastructure spending and slash taxes is seen as inflationary.

Since the election, the fixed 30-year mortgage rate has increased about 60 basis points to an average 4.16 percent, the highest level since October 2014, according to data from mortgage finance firm Freddie Mac.

Mortgage rates are expected to rise further after the Federal Reserve raised its benchmark overnight interest rate last week by 25 basis points to a range of 0.50 percent to 0.75 percent. The U.S. central bank forecast three rate hikes next year.

The prospect of higher mortgage rates could have pushed undecided buyers into the market, a trend that could persist into early 2017. A separate report from the Mortgage Bankers Association on Wednesday showed applications for loans to buy a home increased 3 percent last week from the previous week.

The dollar was trading lower against a basket of currencies after the data, while prices for U.S. government bonds rose. U.S. stocks were little changed, with the Dow Jones industrial average still flirting with the 20,000 mark.

The PHLX housing index rose 0.40 percent.

TIGHT INVENTORY

Despite last month's rise, existing home sales remain constrained by a persistent shortage of properties available for sale. Housing is being supported by improving household formation as the tightening labor market improves employment prospects for young adults.

The number of unsold homes on the market fell 8.0 percent from October to 1.85 million units. Supply was down 9.3 percent from a year ago and has now declined for 18 straight months on a year-on-year basis.

At November's sales pace, it would take 4.0 months to clear the stock of houses on the market, down from 4.3 months in October. A six-month supply is viewed as a healthy balance between supply and demand.

The dearth of homes for sale is keeping upward pressure on house prices. The median house price was $234,900 last month, a 6.8 percent increase from a year ago.

Rising house prices are increasing equity for homeowners and encouraging some to put their homes on the market, but making it more difficult for first-time buyers to purchase homes.

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