December Existing Home Sales Down 6.4%

Existing home sales fell for the first time in three months in December, the National Association of Realtors reported yesterday.

NAR reported total existing home sales decreased by 6.4 percent from November to a seasonally adjusted rate of 4.99 million in December and fell by 10.3 percent from a year ago. Single-family home sales fell to a seasonally adjusted annual rate of 4.45 million in December, down from 4.71 million in November and by 10.1 percent from a year ago. The median existing single-family home price rose to $255,200 in December, up 2.9 percent from a year ago.

Existing condominium and co-op sales fell to 540,000 units in December, down 12.9 percent from last month and down 11.5 percent from a year ago. The median existing condo price rose to $240,600 in December, up 2.3 percent from a year ago.

Nationally, the median existing home price for all housing types in December rose to $253,600, up 2.9 percent from a year ago ($246,500), the 82nd straight month of year-over-year gains. Total housing inventory at the end of December decreased to 1.55 million, down from 1.74 million existing homes available for sale in November, but represents an increase from 1.46 million a year ago. Unsold inventory is at a 3.7-month supply at the current sales pace, down from 3.9 last month and up from 3.2 months a year ago.

All four regions saw declines. Sales in the Northeast decreased by 6.8 percent to an annual rate of 690,000, 6.8 percent below a year ago. The median price in the Northeast rose to $283,400, up by 8.2 percent from a year ago. In the Midwest, sales fell by 11.2 percent from last month to an annual rate of 1.19 million in December, down by 10.5 percent from a year ago. The median price in the Midwest was $191,300, unchanged from last year.

Sales in the South dropped by 5.4 percent to an annual rate of 2.09 million in December, down 8.7 percent from last year. The median price in the South rose by $224,300, up 2.5 percent from a year ago. Sales in the West dipped by 1.9 percent to an annual rate of 1.02 million in December, 15 percent below a year ago. The median price in the West rose to $374,400, up 0.2 percent from a year ago.

“Similar to what we saw in our own purchase mortgage application data, a lot of the weakness to end the year was likely caused by a combination of factors, including a lack of confidence in the broader economic outlook, stock market volatility and the higher mortgage rates seen most of 2018,” said MBA Associate Vice President of Economic and Industry Forecasting Joel Kan. “Looking ahead, many potential homebuyers still face affordability challenges, but we do expect this to dissipate slowly, as there have been more signs of moderating home-price growth and accelerating wage growth, which should help bridge the affordability gap.”

“Hopes of lower mortgage rates leading to a noticeable improvement in home sales were dashed during December,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Housing market data for the winter months are notoriously difficult to interpret given the unusually large seasonal adjustment factors. However, December’s report caps a year in which the combination of rising home prices and higher mortgage rates weighed considerably on home buying conditions. Sales throughout 2018 saw a significant loss of momentum compared to 2017.”

Vitner noted homes are staying on the market slightly longer, which gives buyers more negotiating power. “Given the rapid appreciation of prices seen earlier in the cycle, some moderation should benefit homebuyers as mortgage rates will likely continue to gradually trend higher in coming months.”

NAR Chief Economist Lawrence Yun said current housing numbers are partly a result of higher interest rates during much of 2018. “The housing market is obviously very sensitive to mortgage rates,” he said. “Softer sales in December reflected consumer search processes and contract signing activity in previous months when mortgage rates were higher than today. Now, with mortgage rates lower, some revival in home sales is expected going into spring.”

The report said properties typically stayed on the market for 46 days in December, up from 42 days in November and 40 days a year ago. Thirty-nine percent of homes sold in December were on the market for less than a month.

NAR said first-time buyers represented 32 percent of sales in December, down from last month (33 percent), but the same as a year ago. All-cash sales accounted for 22 percent of transactions in December, up from November and a year ago (21 and 20 percent, respectively). Individual investors purchased 13 percent of homes in December, the same as November but down from a year ago (16 percent).

The report said distressed sales represented 2 percent of sales in December, unchanged from 2 percent last month and down from 5 percent a year ago.