The numbers: Existing home sales beat analyst estimates and rose in December, even as inventory fell back to a record low. Total existing home sales fell 0.7% from November to a seasonally adjusted annual rate of 6.76 million, the National Association of Realtors reported Friday. Compared to a year ago, home sales increased approximately 22%.
“Home sales increased in December, and for 2020 as a whole, we saw sales hit their highest levels since 2006, despite the pandemic,” Lawrence Yun, chief economist for the trade group, said in the report. Economists surveyed by MarketWatch had projected that existing home sales would fall at an average rate of 6.55 million. What happened: The median price for existing homes in December was $ 309,800, which is nearly 13% higher than a year ago. Prices increased in all regions of the country. The inventory of homes for sale fell 16% between November and December. As of December, the market had a 1.9-month supply of homes for sale based on the current sales pace, a record low. A 6-month supply is considered to be a sign of a balanced market. At the regional level, home sales increased the most in the Northeast (4.5% more since November), followed by the South (1.1% more). Sales were unchanged in the Midwest and fell 1.4% in the West. The Big Picture: While sales did not continue their downward streak since November, the increase is likely to be brief this winter. Mortgage application data has been trending downward, likely a reflection of stricter lending standards and buyer fears of the current wave of COVID-19 infections, said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “The bottom line here is that the surge in mortgage demand and home sales is over, for now, and construction will follow suit,” Shepherdson wrote in an investigative report. “House prices, however, will continue to rise rapidly given the imbalance between supply and demand, but we do not expect to see any sustained acceleration until the summer.” That said, economists expect mortgage rates to remain historically low for the foreseeable future, and the economy is likely to show signs of improvement as more people are vaccinated. That should boost the housing market in the spring. The problem for buyers is that it is not yet clear if more people will choose to list their homes in the coming months. With the inventory of homes for sale at record lows, buyers will be forced to compete more to buy a home, paying ever higher prices. Ultimately, the supply of homes could limit the number of rooms that home sales have to grow. What they are saying: “While new mortgage applications increased at the end of the year, housing demand appears to have cooled a few degrees due to increased anxiety related to COVID, a record supply of available homes and rising prices.” , Robert Kavcic, senior economist at BMO Capital Markets, wrote in a research note. Market reaction: The Dow Jones Industrial Average DJIA, -0.77% and the S&P 500 SPX, -0.48% were both down in Friday morning trading.