Existing Home Sales Decline Sharply in December

Total existing-home sales, released by the National Association of Realtors, decreased 6.4% to a seasonally adjusted rate of 4.99 million in December, after two consecutive months of increase. Compared with a year ago, sales decreased 10.3% in December, the lowest level since November 2015. Total existing home sales include single-family homes, townhomes, condominiums and co-ops.

The first-time buyer share slightly declined to 32% from 33% last month but remained unchanged from a year ago. The December inventory decreased to 1.55 million units from 1.74 million units in November, but was up from 1.46 million units compared to a year ago. At the current sales rate, the December unsold inventory represents a 3.7-month supply, down from a 3.9-month supply last month and up from a 3.2-month supply a year ago.

Homes stayed on the market for 46 days in December, up from 42 days in November and 40 days a year ago. In December, 39% of homes sold were on the market for less than a month.

The December all-cash sales share was 22%, up from November and a year ago (21 and 20 percent, respectively).

The December median sales price of $253,600 was up 2.9% from a year ago, representing the 82nd consecutive month of year-over-year increases. The December median condominium/co-op price of $240,600 was up 2.3% from a year ago.

In 2018, the existing home sales had remained sluggish due to rising mortgage rates, growing home prices and tight inventory. Though the sales bounced back in October after six consecutive months of declines due to an increase in inventory and slower home price growth, it still ended the year on a low note. The total sales remained down at both national and regional level compared to a year ago.

Regionally, existing home sales fell in all regions in December compared to the previous month. Year-over-year, sales declined in all four regions, ranging from 6.8% in the Northeast to 15% in the West.

The NAR described the softer sales in December resulted from the rising mortgage rates, indicating the housing market is very sensitive to the mortgage rates. But the several consecutive months of increases in inventory may stabilize home price growth. Meanwhile, builder confidence in January rose by two points, as the recent decline in mortgage rates helped to sustain builder sentiment.



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1 reply

  1. Since mortgage rates have been held artificially low for over 10 years, many real estate professionals do not know how to deal with rising interest rates. When rate increases have been as well publicized as they have recently, potential buyers are discouraged from even looking at opportunities. There are many effective ways to offset or minimize higher rates. For example, if the main issue is the anticipation of even higher interest rates, buying a forward commitment that sets and maximum rate is an excellent way to deal with that issue. It adds cost but providing a rate cap with a “float down” feature that provides the buyer with a lower rate should rates actually decline increases the effectiveness. Another effective approach is to provide a temporary mortgage rate buydown. These can range from a 3%, 2% 1% that provides lower payments over the first three years but would cost just under 6% of the mortgage amount to a more affordable 2%, 1% temporary buydown, which would cut the cost in about half or my personal favorite while rates are still historically low, the 1 1/2%, 1/2% which is very affordable and effective. The 1 1/2% temporary buydown would provide a first year rate of approximately 3%. The things builders should keep in mind is that while buyers shop based on price, they buy based on down payment, closing costs and first mortgage payment. Second, because they buy on these factors, advertising down payment and initial monthly payment information is a very good move, especially for entry level product. The main thing in dealing with potential mortgage issues is to have a lender who is knowledgeable, innovative and aggressive. If your lender doesn’t understand the above, find another lender.

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