By Lucia Mutikani
WASHINGTON (Reuters) - U.S. home sales unexpectedly rose in November, but recorded their biggest annual decline in 7-1/2 years, adding to other data that have painted a grim picture of the housing market.
There are concerns that the persistent housing market weakness could spill over to the broader economy, which continues to be bolstered by robust consumer spending.
The softening housing market is not expected to discourage the Federal Reserve from raising interest rates when officials wrap up a two-day policy meeting on Wednesday. The U.S. central bank has increased borrowing costs three times this year.
The National Association of Realtors said existing home sales increased 1.9 percent to a seasonally adjusted annual rate of 5.32 million units last month.
October's sales pace was unrevised at 5.22 million units. Sales have now increased for two straight months.
Economists polled by Reuters had forecast existing home sales falling 0.6 percent to a rate of 5.20 million units in November. Existing home sales, which make up about 90 percent of U.S. home sales, tumbled 7.0 percent from a year ago in November, the largest annual drop since May 2011.
Sales are down 2.3 percent in the first 11 months of this year compared to the same period last year.
The housing market is being constrained by higher mortgage rates as well as land and labour shortages, which have led to tight inventory. Though house price inflation has slowed significantly, it continues to outpace wage growth, sidelining some first-time homebuyers.
A survey on Monday showed confidence among single-family homebuilders dropped to more than a 2-1/2-year low in December. Single-family homebuilding dropped to a 1-1/2-year trough in November, government data showed on Tuesday.
U.S. financial markets were little moved by the home resales data as investors awaited the Fed's rate decision and monetary policy projections for 2019.
The 30-year fixed mortgage rate has risen more than 60 basis points this year to about 4.63 percent, according to data from mortgage finance agency Freddie Mac.
Last month, existing home sales rose in the Northeast, Midwest and populous South. They fell in the West, likely affected by the wildfires in California.
There were 1.74 million previously owned homes on the market in November, up from 1.67 million a year ago. The inventory crunch is easing as demand slows especially in the West, which has seen a surge in house prices.
At November's sales pace, it would take 3.9 months to exhaust the current inventory, down from 4.3 months in October and up from 3.5 months a year ago. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.
The median existing house price increased 4.2 percent from a year ago to $257,700 in November.
Houses for sale typically stayed on the market for 42 days in November, up from 36 days in October and 40 days a year ago. Forty-three percent of homes sold in November were on the market for less than a month.
The share of first-time buyers increased to 33 percent last month from 31 percent in October and 29 percent a year earlier.
According to the NAR, sales were slowing in the upper end of the market. The Realtors group said inventory remained tight on the lower end, which accounts for a large portion of the housing market.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)