Wednesday, January 26, 2022

Best Home Sales in Years

 The Mortgage Corner

Home sales are holding up and prices slowly moderating, even with limited inventories. December new-home sales jumped 12 percent in a year, according to the US Census Bureau. Also in 2021, existing-home sales totaled 6.12 million – an increase of 8.5 percent from the prior year and the highest annual level since 2006.

“Sales of new single‐family houses in December 2021 were at a seasonally adjusted annual rate of 811,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.  This is 11.9 percent (±20.3 percent) above the revised November rate of 725,000, but is 14.0 percent (±16.6 percent)* below the December 2020 estimate of 943,000. An estimated 762,000 new homes were sold in 2021. This is 7.3 percent (±5.1 percent) below the 2020 figure o 822,000.”

Census.gov

New-home sales have been rising steadily since the end of the Great Recession and housing bubble in 2009, as the Census graph shows. Why not, with so few homes for sale, according to the Realtors?

"Buyer competition alone is unrelenting, but home seekers have also had to contend with the negative impacts of supply chain disruptions and labor shortages this year," said NAR chief economist Lawrence Yun. "These aspects, along with the exorbitant prices and a lack of available homes, have created a much tougher buying season."

The inventory of unsold existing homes fell to an all-time low of 910,000 at the end of December,, which is equivalent to 1.8 months of the monthly sales pace, also an all-time low since January 1999.

This is while last week, on a year-over-year basis, private residential construction spending is up 16.3 percent. Non-residential spending is up 6.7 percent year-over-year. Public spending is down 0.8 percent year-over-year.

That’s why the inventory of homes under construction at 263,000, is the highest since 2007.

Calculated Risk

Housing prices are beginning to slow their climb as can be seen in the above Calculated Risk graph. CR’s Bill McBride recently commented on the price moderation:

“The MoM increase in Case-Shiller was at 1.14%; still historically high, but lower than the increases in the 2nd half of 2020 and first half of 2021. House prices started increasing sharply in the Case-Shiller index in August 2020, so the last 16 months have all been historically very strong. But the peak of MoM growth is behind us - and the year-over-price growth is starting to decelerate.”

So let us hope that for sale inventories continue to grow and housing prices continue to moderate in 2022, so that more homes become affordable. The demand for housing is at an all-time high and consumers’ personal savings still at a historic high.

There is no better time to recover from COVID-19’s many variants.

Harlan Green © 2021

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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