Sales of previously owned U.S. homes slowed in December, but 2017 was still the best year for the hot housing market since the mid-2000s boom.
Existing-home sales fell 3.6% in December from the prior month to a seasonally adjusted annual rate of 5.57 million, the National Association of Realtors said Wednesday.
For 2017 as a whole, though, sales increased 1.1% to 5.51 million, the best year for sales since 2006’s 6.48 million.
Home sales grew in November to the strongest pace in more than a decade, buoyed in part by solid economic growth. Economists said part of the sales gain could reflect catch-up after sale closings were knocked off course by late-summer hurricanes. December could have marked a reversal of some of that bounceback.
“The promising news is that existing home sales are up over the last year despite chronically low inventory,” said Cheryl Young, senior economist at Trulia. “There is a lot of pent-up demand (and) still a significant amount of people looking to buy homes despite really low inventory.”
A shortage of available houses on the market has driven up prices in many regions.
At the current sales pace, the stock of homes on the market would be gone in 3.2 months, which the NAR says is the lowest inventory since it began tracking these data in 1999.
Edie Butler, a North Carolina-based Realtor with Keller Williams, said the supply of homes available for sale in the Charlotte market started decreasing after peaking in October 2010 at more than 50,000. This month, there were 29,800 homes for sale, she said.
“At this time last year we were in a seller’s market,” Ms. Butler said. “This year…we’re in an even tighter seller’s market.”
While waiting to close on the purchase of a new three-story townhome in Charlotte, N.C., Mike Hendricks, senior vice president at bank F.N.B. Corp., put his Greensboro home up for sale earlier this week.
“I’m taking a chance on the confidence that I can sell it relatively quickly and not have two house payments for too long,” Mr. Hendricks said, noting he felt a sense of comfort due to the quick average selling time of 73 days in his neighborhood.
Several factors are converging to buttress home buying. The national unemployment rate in December was 4.1%, holding at a 17-year low. With so many Americans working, more can afford to go out and buy a home. Gauges of household confidence remain elevated. Borrowing costs remain low by historical standards; the average interest rate on a 30-year fixed-rate mortgage in December was 3.95%, according to Freddie Mac.
Still, the limited inventory on the market is driving up home prices at a rapid pace, potentially blocking some would-be buyers. The median sale price for an existing home in December was $246,800, up 5.8% from a year earlier.
Changes in the tax law passed in December limited deductibility of the most expensive mortgages and made it pricier to live in states with high property taxes. Some of the monthly sales pullback could be attributed to hesitancy on the part of potential home buyers in more expensive states, Trulia’s Ms. Young said.
Purchases of previously owned homes account for the bulk of U.S. homebuying activity.
The Commerce Department is scheduled to release data on December new-home sales Thursday, with economists surveyed by the Journal expecting sales decreased 7.2% last month.
News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.
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(END) Dow Jones Newswires
January 24, 2018 14:03 ET (19:03 GMT)