After a small November retreat, December existing-home sales bounced back with an annual rate of 5.54 million for the month, according to the National Association of Realtors (NAR).
That seasonally adjusted rate is up 3.6% from November, bringing total existing-home sales for all of 2019 to 5.34 million — the same level as 2018.
“I view 2019 as a neutral year for housing in terms of sales,” said Lawrence Yun, chief economist for the NAR, who noted that home sales saw a lot of fluctuation over the course of the year. “Home sellers are positioned well, but prospective buyers aren’t as fortunate. Low inventory remains a problem, with first-time buyers affected the most.”
Indeed, unsold inventory has now fallen year over year for seven straight months, putting downward pressure on home sales. The total housing inventory at the end of December was at 1.4 million units, down 14.6% from November and 8.5% from December 2018. Unsold inventory at year’s end was at a 3.0-month supply at the current sales pace, down from 3.7 months in both November 2019 and December 2018.
The inventory landscape isn’t unexpected, but problematic nonetheless, said Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association.
“Typically, the inventory of homes on the market drops at the end of the year,” he explained. “However, the supply of existing homes is now at a record low, and this will constrain the pace of sales this spring from being even stronger. However, the recent gains in new home construction is a positive, as the total inventory on the market will allow prospective buyers to find properties.”
Fratantoni did also say that he expects home sales to rise this year as new residential construction is delivered, thanks to the healthy job market and low mortgage rates.
“We saw the year come to a close with the economy churning out 2.3 million jobs, mortgage rates below 4% and housing starts ramp up to 1.6 million on an annual basis,” echoed Yun. “If these factors are sustained in 2020, we will see a notable pickup in home sales in 2020.”
Median existing-home price in December was $274,500. That’s a 7.8% increase from the same month one year prior, marking 94 straight months of year-over-year price growth.
“Price appreciation has rapidly accelerated, and areas that are relatively unaffordable or declining in affordability are starting to experience slower job growth,” Yun said. “The hope is for price appreciation to slow in line with wage growth, which is about 3%.”