Existing home sales slipped 3.6 percent to 5.57 million in December from a downwardly revised 5.78 million in November 2017, according to the monthly existing home sales report released by the National Association of Realtors (NAR) on Wednesday. However, 2017 as a whole saw existing home sales increase 1.1 percent to 5.51 million sales pace, surpassing 5.45 million recorded in 2016 and the highest since 2006, the report said.
“Existing sales concluded the year on a softer note, but they were guided higher these last 12 months by a multi-year streak of exceptional job growth, which ignited buyer demand,” said Lawrence Yun, Chief Economist at NAR.
According to the report, total housing inventory at the end of December dropped 11.4 percent to 1.48 million existing homes available for sale and is now 10.3 percent lower than a year ago after falling year-over-year for 31 consecutive months.
Properties typically stayed on the market for 40 days in December, which is unchanged from November and down from a year ago. Forty-four percent of homes sold in December were on the market for less than a month.
“Market conditions were far from perfect. New listings struggled to keep up with what was sold very quickly, and buying became less affordable in a large swath of the country. These two factors ultimately muted what should have been a stronger sales pace,” Yun said. “Closings scaled back in most areas last month for this same reason.”
According to Tendayi Kapfidze, Chief Economist at LendingTree, buyers continue to face a market with limited choices in 2018. “Under two million homes have been available for sale since October 2016, and December’s 1.48 million homes for sale represent just 3.2 months’ worth of inventory. Rising rates and the tax plan could further reduce inventory in 2018 as current homeowners face disincentives for moving,” Kapfidz explained.
The report indicated that first-time buyers were 32 percent of sales in December, up from 29 percent in November and unchanged from a year ago. The median existing-home price for all housing types in December was $246,800, up 5.8 percent from December 2016.
“Rising wages and the expanding economy should lay the foundation for 2018 being the turning point towards an uptick in sales to first-time buyers. However, if inventory conditions fail to improve, higher mortgage rates and prices will further eat into affordability and prevent many renters from becoming homeowners,” Yun said.