December Existing Home Sales: A Retreat Following a Strong November
- Existing home sales fell in December after a strong November, declining 3.6 percent from November to 5.57 million units at a seasonally adjusted annual rate (SAAR).
- They ended 2017 up 1.1 percent from 2016, a slowdown from 3.8 percent in 2016 and 6.5 percent in 2015.
- For-sale inventory of existing homes ended 2017 down 10.2 percent from a year earlier, including a 0.8 percent decline in December to 1.7 million units (SAAR). Single-family home inventory edged 0.2 percent higher to 1.51 million units (SAAR).
December’s existing home sales fell 3.6 percent from November to 5.57 million units at a seasonally adjusted annual rate (SAAR), according to the National Association of Realtors (NAR) – retreating from the 11-year high reported in November.
Despite the decline, gains for the year totaled 1.1 percent – a substantial slowdown from the 3.8 percent pace of 2016 and 6.5 percent in 2015. Sales from the previous December also rose 1.1 percent from November sales that were revised down from 5.81 million units to 5.78 million units (both SAAR).
The decline in sales was much sharper among condos/coops, which fell 11.6 percent in December after a very strong 9.5 percent increase in November. Condo/coop sales for November were initially reported as 720,000 units (SAAR) – a 14.3 percent jump from October – but were revised downward to 690,000 units (SAAR).
Regionally, the West saw a 22.2 percent decline in condo/coop sales in December, accounting for half of the nationwide decline (despite accounting for less than one-quarter of all condo/coop sales). Sales of existing single-family homes fell 2.6 percent to 4.96 million units (SAAR).
After posting a small increase in September, on-market inventory has continued to slide for the past three months, declining 0.8 percent in December to 1.70 million units (SAAR), the lowest number since the data begin in 1999. For-sale inventory of existing homes ended 2017 down 10.2 percent from a year earlier.
Looking only at single-family homes, inventory edged 0.2 percent higher in December to 1.51 million units (SAAR), totaling about 3,000 more single-family homes (SFR) on the market nationwide in December than in November. SFR inventory is down 9.6 percent year-over-year, equivalent to 160,000 fewer homes for sale than in December 2016. In the history of the series, which dates to June 1982, it was the second lowest number of single-family homes on the market ever reported, with only November reporting fewer.
The median seasonally adjusted price of existing homes sold in December retreated slightly from the all-time high of $252,200 reported in November, falling 0.4 percent to $251,200, up 5.8 percent over the year.
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.