Existing-home sales ended the year with a whimper but managed to maintain the best sales record in 11 years, the National Association of Realtors reported Wednesday.
December existing-home sales slipped 3.6% to a seasonally adjusted annual rate of 5.57 million from a downwardly revised 5.78 million in November, the NAR said. Still, even with last month’s decline, sales came in 1.1% ahead of a year earlier at 5.45 million, the highest since the group reported 6.48 million sales in 2006.
Lawrence Yun, NAR chief economist, says the housing market performed remarkably well for the U.S. economy in 2017, with substantial wealth gains for homeowners and historically low distressed property sales.
“Existing sales concluded the year on a softer note, but they were guided higher these last 12 months by a multi-year streak of exceptional job growth, which ignited buyer demand,” said Yun. “At the same time, market conditions were far from perfect. New listings struggled to keep up with what was sold very quickly, and buying became less affordable in a large swath of the country. These two factors ultimately muted what should have been a stronger sales pace.”
Added Yun, “Closings scaled back in most areas last month for this same reason. Affordability pressures persisted, and the pool of interested buyers at the end of the year significantly outweighed what was available for sale.”
The median existing-home price for all housing types in December was $246,800, up 5.8% from December 2016 ($233,300). December’s price increase marks the 70th straight month of year-over-year gains.
Single-family home sales declined 2.6% to a seasonally adjusted annual rate of 4.96 million in December from 5.09 million in November, but are still 1.0% above the 4.91 million pace a year ago. The median existing single-family home price was $248,100 in December, up 5.8% from December 2016.
Existing condominium and co-op sales fell 11.6% to a seasonally adjusted annual rate of 610,000 units in December, but are still 1.7% above a year ago. The median existing condo price was $236,500 in December, which is 6.4% above a year ago.
December existing-home sales in the Northeast fell 7.5% to an annual rate of 740,000, and are now 2.6% below a year ago. The median price in the Northeast was $261,400, which is 3.0% above December 2016.
In the Midwest, existing-home sales dipped 6.3% to an annual rate of 1.33 million in December, but are still 1.5% above a year ago. The median price in the Midwest was $191,400, up 7.8% from a year ago.
Existing-home sales in the South decreased 1.7% to an annual rate of 2.30 million in December, but are still 3.1% higher than a year ago. The median price in the South was $221,200, up 5.8% from a year ago.
Existing-home sales in the West declined 1.6% to an annual rate of 1.20 million in December, and are now 0.8% below a year ago. The median price in the West was $367,400, up 7.3% from December 2016.
Total housing inventory at the end of December dropped 11.4% to 1.48 million existing homes available for sale, and is now 10.3% lower than a year ago (1.65 million) and has fallen year-over-year for 31 consecutive months. Unsold inventory is at a 3.2-month supply at the current sales pace, which is down from 3.6 months a year ago and is the lowest level since NAR began tracking in 1999.
“The lack of supply over the past year has been eye-opening and is why, even with strong job creation pushing wages higher, home price gains – at 5.8% nationally in 2017 – doubled the pace of income growth and were even swifter in several markets,” said Yun.
First-time buyers were 32% of sales in December, which is up from 29% in November and unchanged from a year ago. NAR’s 2017 Profile of Home Buyers and Sellers – released in late 20174 – revealed that the annual share of first-time buyers was 34%.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage inched higher for the third straight month to 3.95% in December from 3.92% in November. The average commitment rate for all of 2017 was 3.99%.
“Rising wages and the expanding economy should lay the foundation for 2018 being the turning point towards an uptick in sales to first-time buyers,” said Yun. “However, if inventory conditions fail to improve, higher mortgage rates and prices will further eat into affordability and prevent many renters from becoming homeowners.”
Properties typically stayed on the market for 40 days in December, which is unchanged from November and down from a year ago (52 days). 44% of homes sold in December were on the market for less than a month.
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 San Jose-Sunnyvale-Santa Clara, Calif.; San Francisco-Oakland-Hayward, Calif.; Vallejo-Fairfield, Calif.; Colorado Springs, Colo.; and Stockton-Lodi, Calif.
NAR President Elizabeth Mendenhall, a sixth-generation Realtor® from Columbia, Missouri and CEO of RE/MAX Boone Realty, says improving the new tax law is a top priority for Realtors® in 2018. “Especially in high-cost, high-taxed markets, there’s still big concern that the overall structure of the final bill diminishes the tax benefits of home ownership in a way that would adversely affect home values and sales over time,” she said. “As the housing market adjusts to the new law, Realtors® will be listening to their clients and communicating to lawmakers ways to ensure owning a home is truly incentivized in the tax code.”
All-cash sales were 20% of transactions in December, which is down from 22% in November and 21% a year ago. Individual investors, who account for many cash sales, purchased 16% of homes in December, up from 14% both last month and a year ago. For the year, all-cash sales averaged 21% of sales (23% in 2016), and investor sales were at 15% (14% in 2016).
Distressed sales – foreclosures and short sales – were 5% of sales in December, up from 4% in November but down from 7% a year ago. 4% of December sales were foreclosures and 1% were short sales.
