Despite a one percent decrease in the sales of existing homes in December, existing home sales have risen substantially since the recent financial crisis and housing bust.
December’s pace of existing home sales is almost the fastest since 2007. Total sales for 2012 were nine percent higher than last year, the strongest growth the housing market has experienced since 2003.
The decline was mostly concentrated in the South and Midwest, both of which saw declining sales at three percent and 5.9 percent, respectively. Home sales in the Northeast and West, however, saw improvement by 3.2 percent and 5.1 percent, respectively.
Market supply has been constricted, and December’s monthly supply of existing homes fell to 4.4, the lowest reading since May 2005.
House prices also continue to rise, with the median price of existing homes sold increasing to $180,000 in December, up 11.5 percent from one year ago, partially as a result of fewer struggling properties being sold.
“Record low mortgage interest rates clearly are helping many home buyers, but tight inventory and restrictive mortgage underwriting standards are limiting sales,” Lawrence Yun, the chief economist for the National Association of Realtors, said. “The number of potential buyers who stayed on the sidelines accumulated during the recession, but they started entering the market early last year as their financial ability and confidence steadily grew, along with home prices. Likely job creation and household formation will continue to fuel that growth. Both sales and prices will again be higher in 2013.”
Distressed homes, which include foreclosures and short sales, accounted for 24 percent of December sales, an increase from 22 percent in November but below December 2011’s level of 32 percent. Foreclosures sold for an average 17 percent less than market value in December, while short sales were discounted 16 percent on average.
“Although mortgage interest rates should gradually rise as the year progresses, they’re expected to stay below four percent during the first half of the year, meaning qualified buyers generally can stay well within their means,” NAR President Gary Thomas said. “Although tight inventory is limiting home sales in many areas, overall sales are expected to stay on an upward trend. The biggest impact of tight inventory is upward pressure on home prices, but after values fell below replacement construction costs, prices are still affordable in most of the country.”