Existing-Home Sales Dip in December; Inventory Falls to 11-Year Low
By: Mark Lieberman, Five Star Institute Economist
Existing-home sales fell 1.0 percent in December to a seasonally adjusted annual rate of 4.94 million, and November sales were revised downward, slipping below 5 million, the National Association of Realtors (NAR) reported Tuesday. Economists had expected the sales pace to improve to 5.1 million from November’s originally reported 5.04 million.
The median price of an existing single family home rose to $180,800 in December, up 0.8 percent from November and 11.5 percent from December 2011, the strongest year-year gain in seven years.
According to the NAR data, December existing home sales—closed transactions—were up 12.8 percent from one year earlier.
The NAR report followed the report in last week’s Federal Reserve Beige Book that “real estate activity has expanded or held steady in 11 [of 12 Federal Reserve] Districts for existing home sales.”
According to the NAR, the supply of existing homes for sale fell in December to 1.82 million, the lowest level since January 2001. At the current sales pace, the homes available for sale represent a 4.4 month supply, the lowest level since May 2005 when the months’ supply was 4.3 months because of a high sales pace, 7.1 million. The current month’s supply—down 21.6 percent from a year ago—is driven by a low inventory, which begs the question of why homeowners are reluctant to sell.
Part of the reason could be weak prices, which have only recently begun to firm. The median price of an existing-single family home has increased year-year for 10 months in a row for the first time since 2006 at the peak of the housing market. Prices have been erratic since then, dropping year-year for 40 of 41 months since August 2006.
At the current level, the median price is down 21 percent from the July 2006 peak of $230,300 and down 4 percent from the 2012 peak of $188,800 in June.
At the same time, regulators have been rewriting mortgage rules. The new rules will not take effect until next January 2014, hinting at another 12 months of market uncertainty unless lenders rush to make loans before the more restrictive underwriting rules kick in.
With the December sales report, NAR said the preliminary annual total for existing-home sales in 2012 was 4.65 million, up 9.2 percent from 4.26 million in 2011, the highest volume since 2007 when it reached 5.03 million and the strongest increase since 2004.
Distressed homes—foreclosures and short sales—accounted for 24 percent of December sales (12 percent were foreclosures and 12 percent were short sales), up from a 22 percent in November but below the 32 percent share in December 2011. Foreclosures sold for an average discount of 17 percent below market value in December, while short sales were discounted 16 percent.
Unlike the government report on new home sales which tracks contracts, the NAR report is based on closings which means this report, though labeled “December” actually reflects economic conditions in October when contracts were signed.
The median time on market for all homes was 73 days in December, up from 70 days in November, but 26.3 percent below 99 days in December 2011. Short sales were on the market for a median of 117 days, while foreclosures typically sold in 45 days; non-distressed homes took 74 days. Thirty-one percent of all homes sold in December were on the market for less than a month.
First-time buyers, the NAR said, accounted for 30 percent of purchases in December, unchanged from November; they were 31 percent in December 2011.
All-cash sales were at 29 percent of transactions in December, compared with 30 percent in November and 31 percent in December 2011. Just under 44 percent of home sold were priced between $100,000 and $250,000.
On a regional basis, existing-home sales in the Northeast increased 3.2 percent to an annual rate of 640,000 in December, representing a 10.3 percent improvement from December 2011. The median price in the Northeast stood at $231,600, up 0.8 percent from November and 5.3 percent from a year ago.
Existing-home sales in the Midwest saw a 5.9 percent decrease in December, dropping to a rate of 1.12 million. However, sales are still up 15.5 percent year-year. The median price in the Midwest finished at $144,800, which is 2.3 percent above November and 12.3 percent above December 2011.
In the South, existing-home sales were down 3.0 percent to an annual pace of 1.95 million, but still stand higher by 14.7 percent on a yearly basis. The median price in the South averaged $161,100, up 2.8 percent from November and up 11.0 percent from a year ago.
Existing-home sales in the West climbed 5.1 percent to a pace of 1.23 million in December, representing an 8.8 percent yearly gain. The median price in the West stood at $239,900, down 1.9 percent from November but up 17.3 percent from December 2011.
Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:40 am and again at 9:40 eastern time.
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