Despite a December that saw a surge in housing starts, the ongoing shortage of for-sale homes persists, driving up prices both annually and monthly, according to Redfin.
The Seattle-based brokerage reported that home prices grew 6.9% year over year and 1.1% month over month in December, bringing the median to $312,500 across the 217 metros analyzed by Redfin. The year-to-year home price gain is the highest in 19 months, while the seasonally adjusted monthly jump is the biggest gain seen by Redfin since February 2018.
Meanwhile, the supply of homes for sale fell 14.9% year over year, marking the sixth consecutive month of decreases and the steepest drop since March 2013. There were fewer homes for sale in December than any time since at least December 2012. Just one city among the top 85 largest metros tracked by Redfin posted a year-to-year inventory increase: Knoxville, Tennessee, where inventory grew 5.3%. Meanwhile, large drops in inventory were seen in areas like Salt Lake City (where inventory fell 54.7%); Tacoma, Washington (a loss of 44.3%); and San Diego (down 40.3%) during December.
“Many homeowners have refinanced their mortgages to take advantage of low interest rates and therefore feel committed to staying put,” said Daryl Fairweather, Redfin’s chief economist. “The lack of homes for sale is going to fuel competition and price growth in 2020.”
Among those 85 largest metros, just two saw a year-over-year drop in median sale price: New York, where prices fell 2.4%, and San Francisco, where they dwindled by 1.7%. In New York’s case, Redfin senior data journalist Tim Ellis said, part of the drop may be attributed to the increase in New York City’s “mansion tax” on homes priced above $1 million.
But while the price cooldown continued in those two pricey cities, other expensive areas are starting to simmer again, said Fairweather.
“Low mortgage rates and a strong economy fueled homebuyer demand in December, which boosted both home sales and prices,” he said. “Prices heated up in West Coast metros like Seattle and Los Angeles, which indicates the slowdown of 2019 has officially ended in these markets.”
And while prices rose the fastest in more affordable metros during December — Memphis, with a median price of $190,000, topped the list with 15.9% growth — Ellis said that newly raised loan limits for government-backed loans could bring even more buyers into the market and heat home prices even further in more expensive markets.
The already favorable buying environment is already pushing activity, with home sales up 6.8% annually in December — a 33-month high in sales growth. December was the fifth consecutive month of year-over-year increases; on a monthly basis, home sales were up 1.0% from November, seasonally adjusted.