The U.S. residential market showed significant signs of slowing in November, primarily driven by persistently high mortgage rates.

According to a report released by Realtor.com, market activity in November was the slowest in five years, with the typical home staying on the market for 62 days, an increase of 11 days from last year, indicating buyers' caution about real estate transactions in light of high interest rates.

Despite the fact that the market typically cools off during this season, November's performance remained subdued.

With 30-year fixed mortgage rates approaching 7%, many buyers on a budget have dropped out of the market, causing a large number of homes to languish.

Nonetheless, home prices edged down overall, with the median home price slipping 0.7 percent year-over-year to $416,880.

However, the market's price dynamics were more complex. Prices per square foot rose 1.6 percent, suggesting that smaller, more affordable homes are taking more of the market.

For buyers, this means that finding a more affordable property becomes an opportunity in a market where home prices are cooling.

Despite the slight drop in home prices in November, sellers were not in a rush to cut prices significantly, with 16.7 percent of listings dropping in price, down from 18 percent last year.

Sellers have become more cautious in the current market environment, especially against the backdrop of rising mortgage rates, and many are choosing to continue to hold on to their original prices, resulting in a backlog of listings. However, buyers still have some bargaining room for properties already on the market.

Meanwhile, housing inventory has increased significantly. the number of active listings in November rose 26.2% year-over-year to its highest level since December 2019, signaling that the market is moving toward a more balanced state.

Nonetheless, the number of new listings declined, with new listings in November up just 2% from last year, a significant slowdown from October's 4.9% increase.

This suggests that high interest rates are still limiting new listings, and many potential sellers are hesitant to “lock in” to lower interest rate mortgages.

In terms of regional distribution, the South saw the largest increase in housing inventory, up 34.8 percent year-over-year.

After several years of housing shortages, inventory in the Southern market is approaching pre-epidemic levels, signaling that the market is gradually returning to stability.

The West was a close second with a 29.2 percent increase in inventory, but still slightly below pre-epidemic levels. Inventories also increased in the Midwest and Northeast, up 18.9 percent and 9.7 percent, respectively.

Despite the overall stagnant market, the number of days a home was on the market in November hit a five-year high, but the pace of sales is still relatively fast compared to pre-epidemic averages.

Buyers seem to have more time to make decisions and are no longer in a rush to close, giving the market more options. However, sellers need to be prepared for wait times that may be longer than expected a few months ago.