Existing-home sales still reported their best year in a decade in 2016 despite a December slide, according to the latest data from the National Association of Realtors (NAR) released Tuesday.
A 2.8 percent decline from November to December dropped existing-home sales down to an annual rate of 5.45 million for the year in 2016, slightly higher than 2015’s rate of 5.25 million but the best year for existing-home sales since the pre-bust year of 2006 (6.48 million).
“Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” NAR Chief Economist Lawrence Yun said. “However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December. While a lack of listings and fast rising home prices was a headwind all year, the surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end.”
The median existing-home price rose by 4 percent over-the-year in December up to $232,200, the 58th consecutive month of year-over-year gains for median home prices. Inventory fell by 6.3 percent over-the-year down to 1.65 million units for sale, the lowest number since NAR began tracking the data in 1999.
“Housing affordability for both buying and renting remains a pressing concern because of another year of insufficient home construction,” said Yun. “Given current population and economic growth trends, housing starts should be in the range of 1.5 million to 1.6 million completions and not stuck at recessionary levels. More needs to be done to address the regulatory and cost burdens preventing builders from ramping up production.”
In Freddie Mac’s latest data, the average 30-year FRM rate was still above 4 percent despite three straight weeks of declines following eight consecutive weeks with an increase.
“December's disappointing numbers may be low in large part because people bought in November instead of December in order to lock in low mortgage rates,” realtor.com senior economist Joseph Kirchner said. “A persistent decline in the number of homes on the market and prices increasing faster than incomes also have contributed. Several trends factored into these numbers: When buyers began to anticipate mortgage rates in November, they rushed to lock in rates, which resulted in a bump in sales. At the same time, while new home construction completions in December were up 8.5 percent compared to a year ago, they were down 7.9 percent since November. And while incomes are rising, home prices are still rising faster. Going forward, sales will continue to be constrained by rising rates and low inventory, but they will be buoyed by rising incomes, more new homes being built, easier access to credit, high rental rates and first-time buyers continuing to enter the market.”