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December Existing Home Sales Dip, but Trend Points Positive

Sorohan, Mike
Existing home sales fell in December, the National Association of Realtors reported yesterday, but total sales in 2012 reached their highest level in five years.

NAR said total existing-home declined by 1.0 percent in December to a seasonally adjusted annual rate of 4.94 million from a downwardly revised 4.99 million in November, but are 12.8 percent higher than a year ago (4.38 million).

“The December data brought the average for the fourth quarter of 2012 to 4.90 million units, a 5 percent increase from the third quarter, and above our forecast of 4.77 million units for the fourth quarter,” said Joel Kan, director of economic forecasting with the Mortgage Bankers Association. “We still expect that existing home sales will see a gradual increase through 2013, but with such low inventory, there is more upward pressure on home prices and we may see a more significant increase in prices over the next couple of quarters.”

NAR said the preliminary annual total for existing-home sales in 2012 rose to 4.65 million, up by 9.2 percent from 4.26 million in 2011, representing the highest volume since 2007 (5.03 million) and the strongest increase since 2004.
"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,” said NAR Chief Economist Lawrence Yun. “Likely job creation and household formation will continue to fuel that growth. Both sales and prices will again be higher in 2013."
Regionally, December existing home sales proved mixed. In the Northeast, sales rose by 3.2 percent to 640,000 and are 10.3 percent above a year ago. The median price in the Northeast was $231,600, up 5.3 percent from a year ago.
Existing home sales in the Midwest fell by 5.9 percent to a pace of 1.12 million but are 15.5 percent higher than a year ago. The median price in the Midwest was $144,800, 12.3 percent above December 2011.
In the South, existing home sales declined by 3.0 percent to 1.95 million but are 14.7 percent above a year ago. The median price in the South was $161,100, up 11.0 percent from a year ago.
Existing home sales in the West rose by 5.1 percent to 1.23 million in December and are 8.8 percent higher than a year ago. The median price in the West was $239,900, 17.3 percent above December 2011.

NAR said total housing inventory at the end of December fell by 8.5 percent to 1.82 million existing homes available for sale, representing a 4.4-month supply at the current sales pace, down from 4.8 months in November, and is the lowest housing supply since May 2005 (4.3 months) near the peak of the housing boom. Listed inventory is 21.6 percent below a year ago, when the supply was 6.4 months. Raw unsold inventory is at the lowest level since January 2001, when 1.78 million homes listed on the market.
The national median existing home price for all housing types was $180,800 in December, 11.5 percent above December 2011, the 10th consecutive month of year-over-year price gains, which last occurred from August 2005 to May 2006, and the strongest increase since November 2005 when it jumped by 12.9 percent.
For all of 2012, the preliminary median existing-home price was $176,600, up by 6.3 percent from $166,100 in 2011, the strongest annual price gain since 2005 (12.4 percent).
Distressed accounted for 24 percent of December sales (12 percent foreclosures and 12 percent short sales), up from 22 percent in November but below the 32 percent share a year ago. Foreclosures sold for an average discount of 17 percent below market value in December, while short sales were discounted 16 percent.
NAR said the median time on market for all homes was 73 days in December, up from 70 days in November, but 26.3 percent below 99 days in December 2011. Short sales were on the market for a median of 117 days, while foreclosures typically sold in 45 days; non-distressed homes took 74 days. Thirty-one percent of all homes sold in December were on the market for less than a month.
The report said first-time buyers accounted for 30 percent of purchases in December, unchanged from November; they were 31 percent in December 2011. All-cash sales stood at 29 percent of transactions in December, compared to 30 percent in November and 31 percent in December 2011. Investors, who account for most cash sales, purchased 21 percent of homes in December, up from 19 percent in November and 21 percent a year ago.
Single-family home sales slipped by 1.4 percent to 4.35 million in December from 4.41 million in November, but are 11.5 percent above the 3.90 million-unit pace in December 2011. The median existing single-family home price was $180,300 in December, up by 10.9 percent from a year ago. Existing condominium and co-op sales rose by 1.7 percent to an annualized level of 590,000 in December from 580,000 in November and are 22.9 percent higher than a year ago (480,000). The median existing condo price was $184,100 in December, up 16.0 percent from December 2011.
“Despite a bit of payback from the solid boost in November, existing home sales are now up 12.8 percent over the past year,” said Anika Khan, senior economist with Wells Fargo Securities, Charlotte, N.C. “While sales fell on the month, some volatility is expected during the seasonally slow months.”

Khan noted “unusually tight inventories” continue to be a big driver in the ongoing upward momentum in median home prices.