Existing-home sales in December increased for the fifth time in the past six months, according to the National Association of Realtors. This was due both to lower mortgage rates and a drop in prices. Existing sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 12.3 percent to a seasonally adjusted annual rate of 5.28 million in December from an upwardly revised 4.70 million in November, but remain 2.9 percent below the 5.44 million sold in 2009.
NAR chief economist Lawrence Yun said sales are on an uptrend. “December was a good finish to 2010, when sales fluctuate more than normal. The pattern over the past six months is clearly showing a recovery,” he said. “The recovery will likely continue as job growth gains momentum and rising rents encourage more renters into ownership while exceptional affordability conditions remain.”
Besides lower home prices, record low mortgage rates continue to encourage home buyers. The 30-year conforming fixed rate is down to 4.54 percent for an approximately 1 point origination fee. The NAR’s composite Affordability Index in is also in record territory at 184.5 percent. This means that a household with a median income of $61,819 could afford a home 184.5 percent higher than the median home price.
Total housing inventory at the end of December fell 4.2 percent to 3.56 million existing homes available for sale, which represents an 8.1-month supply at the current sales pace, down from a 9.5-month supply in November. The months of supply will probably increase over the next few months as sales slow a little, and inventory increases, says Calculated Risk. Inventory levels still remain high, however.
The national median existing-home price for all housing types was $168,800 in December, which is 1.0 percent below December 2009. Distressed homes rose to a 36 percent market share in December from 33 percent in November, and 32 percent in December 2009.
“The modest rise in distressed sales, which typically are discounted 10 to 15 percent relative to traditional homes, dampened the median price in December, but the flat price trend continues,” Yun explained.
A parallel NAR practitioner survey shows first-time buyers purchased 33 percent of homes in December, up from 32 percent in November, but are below a 43 percent share in December 2009.
Investors accounted for 20 percent of transactions in December, up from 19 percent in November and 15 percent in December 2009; the balance of sales were to repeat buyers. All-cash sales were at 29 percent in December, compared with 31 percent in November, but up from 22 percent a year ago. “All-cash sales have been consistently high at about 30 percent of the market over the past six months,” Yun said.
Sales were led by a 16.7 percent surge in the West, followed by 13 percent in the Northeast, 11 percent in the Midwest and 10.1 percent in the South.
Harlan Green © 2011