 | Existing Home Sales Declined 1.0% in December to an Annual Rate of 4.94 Million Units |
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| Posted Under: Data Watch • Home Sales • Housing |
Implications: Existing home sales fell 1.0% in December, but remain right near the highest sales pace since November 2009, which was artificially boosted by the $8,000 homebuyer credit. Sales are up 12.8% from a year ago. Meanwhile, the inventory of existing homes fell to 1.82 million in December from 1.99 million in November, the lowest level since January 2001. Inventories are down 21.6% from a year ago and the months' supply of homes (how long it would take to sell the entire inventory at the current selling rate) fell to 4.4, the lowest level since May 2005 when we were in the height of the housing boom. Just a year ago, the months' supply was 6.4. In the year ahead, higher prices and sales volumes should lure more potential sellers into the market. The 11.5% gain in median prices versus a year ago can be attributed to a couple of factors. First, a lack of inventory while demand is picking up. Second, fewer distressed sales and more sales of larger homes. This can be seen in the data as homes priced from $0-$100,000 were down 16.7% from a year ago while those $1,000,000+ are up 62.3% from a year ago. In general, it still remains tougher than normal to buy a home. Despite record low mortgage rates, home buyers face very tight credit conditions. Tight credit conditions would also explain why all-cash transactions accounted for 29 percent of purchases in December versus a traditional share of about 10 percent. Those with cash are able to take advantage of home prices that are extremely low relative to fundamentals (such as rents and replacement costs); for them, it's a great time to buy. With credit conditions remaining tight, we don't expect a huge increase in home sales anytime soon, but the housing market is definitely on the mend. In other news, the Richmond Fed index, a survey of mid-Atlantic manufacturers, fell to -12 in January from +5 in December. Regional manufacturing surveys have been coming in weaker so far in January, but this may be a head fake considering a lack of supporting evidence such as an increase in unemployment claims. Expect more plow horse growth ahead.
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