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Existing Home Sales Flounder in December

Thursday, January 24, 2019

From Builder Magazine

Existing-home sales declined 6.4% to a seasonally adjusted rate of 4.99 million in the month of December, down 10.3% from a year earlier, the National Association of Realtors (NAR) reported Tuesday.

None of the four major U.S. regions saw a gain in sales activity last month.

Lawrence Yun, NAR’s chief economist, 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. 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 median existing-home price for all housing types in December was $253,600, up 2.9% from December 2017 ($246,500). December’s price increase marks the 82nd straight month of year-over-year gains.

Joel Kan, associate VP of Economic and Industry Forecasting at the Mortgage Bankers Association, pinned much of the blame for the downturn on rising rates. “Existing sales have now decreased year-over-year for four straight months. 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.

“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. With lower mortgage rates to start 2019, and a pickup in purchase applications in recent weeks, we are cautiously optimistic that the spring home buying season will bring better news.”

Single-family home sales came in at a seasonally adjusted annual rate of 4.45 million in December, down from 4.71 million in November, 10.1% below the 4.95 million sales pace from a year ago. The median existing single-family home price was $255,200 in December, up 2.9% from December 2017.

Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 540,000 units in December, down 12.9% from last month and down 11.5% from a year ago. The median existing condo price was $240,600 in December, which is up 2.3% from a year ago.

December existing-home sales in the Northeast decreased 6.8% to an annual rate of 690,000, 6.8% below a year ago. The median price in the Northeast was $283,400, which is up 8.2% from December 2017.

In the Midwest, existing-home sales fell 11.2% from last month to an annual rate of 1.19 million in December, down 10.5% overall from a year ago. The median price in the Midwest was $191,300, unchanged from last year.

Midland, Texas, is one of the hottest metro areas according to Realtor.

Existing-home sales in the South dropped 5.4% to an annual rate of 2.09 million in December, down 8.7% from last year. The median price in the South was $224,300, up 2.5% from a year ago.

Existing-home sales in the West dipped 1.9% to an annual rate of 1.02 million in December, 15% below a year ago. The median price in the West was $374,400, up 0.2% from December 2017.

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.

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.

“Several consecutive months of rising inventory is a positive development for consumers and could lead to slower home price appreciation,” says Yun. “But there is still a lack of adequate inventory on the lower-priced points and too many in upper-priced points.”

Realtor.com®’s Market Hotness Index, measuring time-on-the-market data and listings views per property, revealed that the hottest metro areas in December were Chico, California; Midland, Texas; Odessa, Texas; Columbus, Ohio; and Fort Wayne, Ind.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 4.64% in December from 4.87% in November. The average commitment rate for all of 2017 was 3.99%.

“The partial shutdown of the federal government has not had a significant effect on December closings, but the uncertainty of a shutdown has the potential to harm the market,” said NAR president John Smaby, a second-generation Realtor from Edina, Minnesota and broker at Edina Realty. “Once the government is fully reopened, I am hopeful that housing transactions will increase.”

First-time buyers were responsible for 32% of sales in December, down from last month (33%), but the same as a year ago. NAR’s 2018 Profile of Home Buyers and Sellers – released in late 2018 – revealed that the annual share of first-time buyers was 33%.

All-cash sales accounted for 22% of transactions in December, up from November and a year ago (21 and 20%, respectively). Individual investors, who account for many cash sales, purchased 13% of homes in December, the same as November but down from a year ago (16%).

Distressed sales – foreclosures and short sales – represented 2% of sales in December, unchanged from 2% last month and down from 5% a year ago.

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