23 January 2014
Despite low inventory conditions, existing-home sales bounced back in December and climbed above an annual pace of 5 million sales for the sixth time in seven months, according to the National Association of Realtors®. Median home prices for 2014 rose to their highest level since 2007, but total sales fell 3.1 percent from 2013.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 2.4 percent to a seasonally adjusted annual rate of 5.04 million in December from a downwardly-revised 4.92 million in November. From a year ago, December sales were higher by 3.5 percent and are now above year-over-year levels for the third straight month.
For all of 2014, there were 4.93 million sales, a 3.1 percent decline from 2013 (5.09 million). The national median existing-home price was $208,500, the highest since 2007 ($219,000) and a 5.8 percent increase from 2013 ($197,100).
Lawrence Yun, NAR chief economist, says sales picked up in December to close a 2014 that got off to a sluggish start but showed encouraging signs of activity the second half of the year. “Home sales improved over the summer once inventory increased, prices moderated and economic growth accelerated,” he said. “Sales were measurably better in the second half – up 8 percent compared to the first six months of the year.”
Total housing inventory2 at the end of December dropped 11.1 percent to 1.85 million existing homes available for sale, which represents a 4.4-month supply at the current sales pace – down from 5.1 months in November. Unsold inventory is now 0.5 percent lower than a year ago (1.86 million).
“A drop in housing supply in December raises some affordability concerns in the months ahead as minimal selection and the potential for faster price appreciation could offset the demand from buyers encouraged by a stronger economy and sub-4 percent interest rates,” says Yun. “Housing costs – both rents and home prices – continue to outpace wages and are burdensome for potential buyers trying to save for a down payment while looking for available homes in their price range.”
The median existing-home price3 for all housing types in December was $209,500, which is 6.0 percent above December 2013. This marks the 34th consecutive month of year-over-year price gains.
The percent share of first-time buyers was 29 percent in December, down from 31 percent in November but up from a year ago (27 percent). First-time buyers in 2014 represented an average of 29 percent for the second straight year. A separate NAR survey released in late 20144 revealed that the annual share of first-time buyers fell to its lowest level in nearly three decades.
NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Arkansas says Realtors® are optimistic the Federal Housing Administration’s plan to reduce annual mortgage insurance premiums will have a positive impact on first-time buyers once it goes into effect on January 26. “NAR is a strong supporter of the FHA and its vital role in the mortgage marketplace for home buyers,” he said. “Realtors® support responsible lending to qualified borrowers and the move to lower premiums will enable more buyers to enter the market while continuing to protect taxpayers from the risky lending practices that led to the housing crash.”
All-cash sales were 26 percent of transactions in December, up from 25 percent in November and 32 percent in December of last year. Individual investors, who account for many cash sales, purchased 17 percent of homes in December, up from last month (15 percent) but down from December 2013 (21 percent). Sixty-three percent of investors paid cash in December.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage in December fell to 3.86 percent, its lowest level since May 2013 (3.54 percent), and down from 4.00 percent in November. The average annual rate was 4.17 percent in 2014.
Distressed sales5 – foreclosures and short sales – were up slightly in December (11 percent) from November (9 percent) but are down from 14 percent a year ago. Eight percent of December sales were foreclosures and 3 percent were short sales. Foreclosures sold for an average discount of 15 percent below market value in December (17 percent in November), while short sales were discounted 12 percent (13 percent in November).
Properties typically stayed on the market the same amount of time in December (66 days) as November (65 days) but for a slightly shorter time frame than a year ago (72 days). Short sales were on the market the longest at a median of 98 days in December, while foreclosures sold in 61 days and non-distressed homes took 66 days. Thirty-one percent of homes sold in December were on the market for less than a month.
Single-family and Condo/Co-op Sales
Single-family home sales increased 3.5 percent to a seasonally adjusted annual rate of 4.47 million in December from 4.32 million in November, and are 4.0 percent above the 4.30 million pace a year ago. The median existing single-family home price was $210,200 in December, up 6.3 percent from December 2013.
Existing condominium and co-op sales declined 5.0 percent to a seasonally adjusted annual rate of 570,000 units in December from 600,000 in November, and are unchanged from a year ago. The median existing condo price was $204,000 in December, which is 3.2 percent higher than a year ago.
December existing-home sales in the Northeast declined 2.9 percent to an annual rate of 660,000, but are 3.1 percent above a year ago. The median price in the Northeast was $246,600, which is 3.2 percent above a year ago.
In the Midwest, existing-home sales fell 3.5 percent to an annual level of 1.09 million in December, and are now 2.7 percent below December 2013. The median price in the Midwest was $159,100, up 5.3 percent from a year ago.
Existing-home sales in the South climbed 3.8 percent to an annual rate of 2.17 million in December, and are 7.4 percent above December 2013. The median price in the South was $184,100, up 6.6 percent from a year ago.
Existing-home sales in the West jumped 9.8 percent to an annual rate of 1.12 million in December, and are 2.8 percent above a year ago. The median price in the West was $299,600, which is 5.6 percent above December 2013.
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NOTE: For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.
1Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR re-benchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.
Existing-home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample – about 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.
2Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).
3The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.
The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR’s quarterly metro area price reports.
4Survey results represent owner-occupants and differ from separately reported monthly findings from NAR’s Realtors Confidence Index, which include all types of buyers. Investors are under-represented in the annual study because survey questionnaires are mailed to the addresses of the property purchased and generally are not returned by absentee owners. Results include both new and existing homes.
5Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR’s Realtors® Confidence Index, posted at Realtor.org.
The Pending Home Sales Index for December will be released January 29, and Existing-Home Sales for January is scheduled for February 23; release times are 10:00 a.m. EST.
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