Home sales down and up
Although December existing-home sales declined 2.8 percent, the National Association of Realtors (NAR) is quick to note that sales closed out 2016 as the best year in a decade.
We finished 2016 at 5.45 million sales and surpassed 2015 (5.25 million) as the highest since 2006 (6.48 million).
So what happened in December aside from standard winter weather restrictions? “Ongoing affordability tensions and historically low supply levels” continue to hold the market back, according to NAR.
Ending on a healthy note
Dr. Lawrence Yun, NAR Chief Economist, says the housing market’s best year since the Great Recession ended on a healthy but somewhat softer note.
“Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” he said. “However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.”
Added Yun, “While a lack of listings and fast rising home prices was a headwind all year, 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.”
Inventory levels are dangerously low
The median existing home price rose to $232,200, up 4.0 percent compared to December 2015, the 58th consecutive month of year-over-year gains.
Housing inventory dropped 10.8 percent in December, marking the lowest level since NAR began tracking this data 18 years ago.
Combine the repetitive increases in home prices with diminishing levels of homes available for sale, and you have a major industry challenge.
“Housing affordability for both buying and renting remains a pressing concern because of another year of insufficient home construction,” said Yun. “Given current population and economic growth trends, housing starts should be in the range of 1.5 million to 1.6 million completions and not stuck at recessionary levels. More needs to be done to address the regulatory and cost burdens preventing builders from ramping up production.”
Regional performance varied
Performance wasn’t even nationally, and sales stagnated or fell in all regions:
- December existing-home sales in the Northeast slid 6.2 percent to an annual rate of 760,000, but are still 2.7 percent above a year ago. The median price in the Northeast was $245,900, which is 3.8 percent below December 2015.
- In the Midwest, existing-home sales decreased 3.8 percent to an annual rate of 1.28 million in December, but are still 2.4 percent above a year ago. The median price in the Midwest was $178,400, up 4.6 percent from a year ago.
- Existing-home sales in the South in December were at an annual rate of 2.25 million (unchanged from November), and are 0.4 percent above December 2015. The median price in the South was $207,600, up 6.5 percent from a year ago.
- Existing-home sales in the West fell 4.8 percent to an annual rate of 1.20 million in December, and are now 1.6 percent below a year ago. The median price in the West was $341,000, up 6.0 percent from December 2015.