Existing Home Sales Fall in December, But Rise for 2017

There are two ways to look at Decembers’ existing homes sales report from the National Association of Realtors.

On one hand, existing home sales finished the year on a disappointing note, falling by 3.6 percent. On the other hand, despite remarkable volatility throughout the year, existing home sales finished the year 1.1 percent ahead of 2016-the best performance in 11 years, according to NAR Chief Economist Lawrence Yun.

NAR said total existing home sales fell in December to a seasonally adjusted annual rate of 5.57 million from a downwardly revised 5.78 million in November. Single-family home sales declined 2.6 percent to 4.96 million in December from 5.09 million in November, but improved by 1.0 percent from the 4.91 million pace a year ago. The median existing single-family home price rose to $248,100 in December, up 5.8 percent from a year ago.

Existing condominium and co-op sales fell by 11.6 percent to 610,000 units in December, but improved by 1.7 percent above a year ago. The median existing condo price rose to $236,500 in December, which is 6.4 percent above a year ago.

All four regions saw December declines. Sales in the South decreased by 1.7 percent to an annual rate of 2.30 million in December, but were 3.1 percent higher than a year ago. The median price in the South rose to $221,200, up 5.8 percent from a year ago. Sales in the West declined by 1.6 percent to 1.20 million in December and by 0.8 percent below a year ago. The median price in the West rose to $367,400, up 7.3 percent from December 2016.

Sales in the Northeast fell by 7.5 percent to an annual rate of 740,000 and by 2.6 percent below a year ago. The median price in the Northeast rose to $261,400, 3.0 percent higher than a year ago. In the Midwest, sales fell by 6.3 percent to 1.33 million in December, but improved by 1.5 percent above a year ago. The median price in the Midwest rose to $191,400, up 7.8 percent from a year ago.

For 2017, existing home sales increased by 1.1 percent to a 5.51 million sales pace and surpassed 2016 (5.45 million), the highest since 2006 (6.48 million).

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said increasingly tight inventories “stifled” resales toward the end of 2017; the report said the months’ supply of existing homes for sale fell to just 3.2 months, the lowest level since 1999.

“This past year’s small rise speaks to the difficulty facing the market,” Vitner said. “Stronger job growth and low mortgage rates are boosting demand, but the dearth of inventory is driving prices higher and keeping many potential buyers on the sidelines.”

Cheryl Young, senior economist with Trulia, San Francisco, said demand for housing will only continue. Demand for homes appears undaunted,” she said. “Low unemployment, steady job growth and low mortgage rates led existing home sales to account for 27.2% of inventory sold, well over the pre-recession peak.”

Yun said the housing market performed “remarkably well” for the U.S. economy in 2017, with substantial wealth gains for homeowners and historically low distressed property sales.

“Existing sales concluded the year on a softer note, but they were guided higher these last 12 months by a multi-year streak of exceptional job growth, which ignited buyer demand,” said Yun. “At the same time, market conditions were far from perfect. New listings struggled to keep up with what was sold very quickly, and buying became less affordable in a large swath of the country. These two factors ultimately muted what should have been a stronger sales pace.”

Closings scaled back in most areas last month for this same reason, Yun noted. “Affordability pressures persisted, and the pool of interested buyers at the end of the year significantly outweighed what was available for sale,” he said.

NAR reported the median existing-home price for all housing types in December rose to $246,800, up 5.8 percent from a year ago ($233,300), the 70th straight month of year-over-year gains.

Total housing inventory at the end of December dropped by 11.4 percent to 1.48 million existing homes available for sale and is now 10.3 percent lower than a year ago (1.65 million) and has fallen year-over-year for 31 consecutive months. Unsold inventory is at a 3.2-month supply at the current sales pace, down from 3.6 months a year ago and is the lowest level since NAR began tracking in 1999.

“The lack of supply over the past year has been eye-opening and is why, even with strong job creation pushing wages higher, home price gains–at 5.8 percent nationally in 2017–doubled the pace of income growth and were even swifter in several markets,” Yun said.

NAR said first-time buyers represented 32 percent of sales in December, up from 29 percent in November and unchanged from a year ago. Properties typically stayed on the market for 40 days in December, unchanged from November and down from a year ago (52 days). Forty-four percent of homes sold in December were on the market for less than a month.

The report said all-cash sales represented 20 percent of transactions in December, down from 22 percent in November and 21 percent a year ago. Individual investors purchased 16 percent of homes in December, up from 14 percent both last month and a year ago. For the year, all-cash sales averaged 21 percent of sales (23 percent in 2016), and investor sales were at 15 percent (14 percent in 2016).

Distressed sales represented 5 percent of sales in December, up from 4 percent in November but down from 7 percent a year ago. Four percent of December sales were foreclosures; 1 percent were short sales.