December Home Sales Forecast: Will Buyer Resilience Continue?

• Zillow expects existing home sales to fall in December to 5.54 million units at a seasonally adjusted annual rate (SAAR)
• New home sales should edge slightly higher by 0.3 percent to 594,000 units (SAAR).

Unseasonably cold weather across much of the country along with still-tight inventory and rising mortgage rates weighed on home sales in December according to Zillow’s December home sales forecast. We expect existing home sales, which will be published on Tuesday by the National Association of Realtors, to fall 1.2 percent in December to 5.54 million units at a seasonally adjusted annual rate (SAAR) (figure 1).

Over the second half of 2016, existing home sales consistently beat expectations. Another “beat” in December would be testament to the remarkable resilience of buyers and substantial pent-up demand among home shoppers.

At the same time, we expect new home sales, which the Census Bureau will release on Thursday, to show a small 0.3 percent increase from November, edged ever so slightly higher to 594,000 units (SAAR) (figure 2).

Over 2016 existing and new home sales began to move in opposite directions. While existing home sales were weighed down by tight inventory – growing only 1.7 percent over the year – new home sales began to increase from historic lows, rising 10.4 percent over the year. That said, while existing home sales remain 23.6 percent below their pre-crisis peak, new home sales are 57.2 percent below their pre-crisis peak.

Looking out over the next year, out forecasts point to continued double-digit growth in new home sales and slightly faster existing home sales growth. For December 2017, we expect existing home sales to total 5.70 million units (SAAR), up 4.5 percent from December 2016. For new home sales, we expect 609,000 sales (SAAR) in December 2017, up 13.2 percent over the year.