Rapid Reaction: December Existing Home Sales
Three years of contracting inventory was bound to catch up with transactions sooner or later: Existing home sales posted a weak December, ending 2017 on a disappointing note after appearing to have picked up momentum in October and November.
Existing home sales posted a weak December, ending 2017 on a disappointing note after appearing to have picked up momentum in October and November.
They ended the year very close to where they began it. Sales faced significant headwinds in December – both structural and seasonal. Three years of contracting inventory was bound to catch up with transactions sooner or later, and for much of 2017 inventory was clearly weighing on sales.
Home shoppers and sellers also had to contend with a longer than normal holiday season and rising prices. Condo sales fell particularly sharply in December, which was to be expected given their exceptionally strong surge in November.
Existing home inventory is unlikely to ease in the months ahead, making new home construction all the more critical to meet the housing needs of millennials who are finally confident enough in the economy to buy houses and start families. New construction has shown signs of perking up, but remains well below estimates of demand.
More importantly, builders face rising labor, materials and land costs, making it difficult to build at a price point attractive to entry-level buyers. For the foreseeable future, competition is likely to be fierce, home prices will continue to rise, and buyers will need to prepare for a tough slog before finally taking the keys to a home in this environment.