Mortgage Orb - Patrick Barnard - 24 January 2017
Despite decreasing 2.8% month over month in December, 2016 was the best year in a decade for existing-home sales, according to the National Association of Realtors (NAR).
As of the end of December, existing-home sales were at an annual rate of 5.45 million, thus surpassing the 5.25 million recorded in 2015, NAR says.
It was the best year for existing-home sales since 2006, when there were 6.48 million, according to the association’s data.
Still, rising interest rates and a lack of inventory will continue to create headwinds in 2017, NAR warns.
Year over year, existing-home sales were up only 0.7% in December compared with December 2015.
The median existing-home price for all housing types in December was $232,200, up 4.0% compared with $223,200 in December 2015.
December marked the 58th consecutive month of year-over-year gains.
In a statement, Lawrence Yun, chief economist for NAR, says the “surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end.”
“Higher mortgage rates and home prices, combined with record-low inventory levels, stunted sales in much of the country in December,” Yun adds.
As of the end of December, there were about 1.65 million existing homes available for sale – a decrease of 10.8% compared with November and a decrease of 6.3% compared with December 2015 to reach the lowest level since NAR began tracking the supply of all housing types in 1999.
That’s about a 3.6-month supply at the current sales pace compared with 3.9 months in December 2015.
As of the end of the month, inventory had fallen year over year for 19 straight months, NAR says.
In order to solve the inventory shortage, Yun says builders need to get to a level of about 1.5 million to 1.6 million housing completions per year.
The lack of inventory, rising home prices and rising interest rates have resulted in more first-time home buyers being shut out of the market. In December, first-time buyers were 32% of sales; however, historically, they have been around 40%.
NAR includes townhouses, condominiums and co-ops in its existing-home sales estimates.