After falling to the worst level of the year in November, existing-home sales rebounded last month. The real estate market has been one of the strongest sectors of the economy in recent years, but housing affordability issues should not be ignored as home prices climb at the fastest rate in eight years.
The National Association of Realtors announced Thursday that total existing-home sales – which are completed transactions of single-family homes, town homes, condos, and co-ops — increased 1 percent to a seasonally adjusted annual rate of 4.87 million units in December compared to a downwardly revised 4.82 million units in the previous month. The results were weaker than expected.
Economists estimated an annual pace of about 4.94 million units. Sales have now missed expectations for six consecutive months. Furthermore, sales are 0.6 percent below the 4.90 million unit pace seen in December 2012. This is the second consecutive month that sales were below year-ago levels.
On the positive, existing-home sales for all of 2013 reached 5.09 million sales, which is 9.1 percent higher than 2012. It was also the best year since 2006, when sales hit 6.48 million units with the help of the housing bubble. However, momentum has been moving to the downside, and home prices should return to a more sustainable pace in the near future.
“Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates, and a large pent-up demand driving the market,” said Lawrence Yun, the National Association of Realtors’ chief economist. “We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population.”
In December, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.46 percent from 4.26 percent in November. A year earlier, the rate was only 3.35 percent. According to the Mortgage Bankers Association’s latest weekly report, the rate on the 30-year mortgage is 4.57 percent.
Home prices finished the year on a strong note. The median existing-home price for all housing types in December was $198,000, up 9.9 percent from December 2012. The national median existing-home price for all of 2013 was $197,100, which is 11.5 percent above the 2012 median of $176,800, and was the strongest gain since 2005, when it rose 12.4 percent.
With home prices posting such rapid increases, some buyers are being priced out of the market. First-time buyers accounted for only 27 percent of purchases last month. That is down from 28 percent in November and 30 percent in December 2012. Meanwhile, all-cash sales, which are common among investors, remained the same, at 32 percent of transactions last month.
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