“Record-low mortgage interest rates clearly are helping many home buyers, but tight inventory and restrictive mortgage underwriting standards are limiting sales,” says Lawrence Yun, the NAR’s chief economist. The rate in November was revised to 4.99 million from an earlier estimate of 5.04 million, which was the highest rate since November 2009. Economists polled by MarketWatch had expected a rate of 5.1 million for December, with buyers eager to take advantage of relatively high affordability in a housing market that is gaining steam.
Buyers’ concerns about the “fiscal cliff” may be at least partially behind December’s sales decline, wrote Millan Mulraine, macro strategist at TD Securities, in a research note. “Given this, we anticipate that sales activity could rebound in January following the tax deal, given the very supportive buying conditions and the increasing incentive for first-time buyers (who are currently sitting on the fence) to slowly move into the market as prices begin to firm,” Mulraine wrote.
By region, it was a mixed bag. December’s existing-home sales fell by 5.9 percent in the Midwest and by 3 percent in the South, compared with the prior month; sales rose by 5.1 percent in the West and by 3.2 percent in the Northeast. Sales in each of the four regions were up from same period in the prior year.
Despite the decline in December, existing-home sales are up 12.8 percent from the same period in the prior year. The median existing-home price rose 11.5 percent from the prior year to $180,800. Inventories fell 8.5 percent to 1.82 million units in December, representing at the current sales rate a 4.4-month supply, the lowest supply ratio since 2005. It’s typical for inventories to decline in winter. But Yun warns that persistently low inventory could lead to too much price growth in 2013. “We don’t want to see a rapid appreciation in prices,” he says.
Meanwhile, the median price reached $176,600 in 2012, up 6.3 percent from the prior year for the highest annual growth since 2005. Other recent housing data have also shown a market gaining strength but still has far to go. A report on home-builder sentiment showed that confidence is holding at a more-than-six-year peak. Separately, a report showed that new home construction jumped 12 percent in December to the highest rate in more than four years, rushing past Wall Street’s expectations.