US existing home sales make major rebound in December

Last year was the best for the existing market since 2006. Trends look less positive, but still strong for 2016. 

2015 closed on a high note for sales of existing homes in the United States, the National Association of Realtors (NAR) announced Friday.

Completed transactions for single-family homes jumped 14.7 percent in December, reaching an annual rate of 5.46 million units. The sales number for December was boosted by new federal mortgage rules that delayed November transactions into the next month, the NAR press release said. The annual rate of 5.46 million beat economist predictions, gathered by The Wall Street Journal, of a December annualized rate of 5.3 million units.

With the large December turnaround, 2015 existing home sales increased by 7.7 percent over 2014. That pace, according to the NAR's chief economist, is not sustainable. 

"Although some growth is expected, the housing market will struggle in 2016 to replicate last year's 7 percent increase in sales," Lawrence Yun, NAR chief economist, said in the press release. "In addition to insufficient supply levels, the overall pace of sales this year will be constricted by tepid economic expansion, rising mortgage rates and decreasing demand for buying in oil-producing metro areas."

The median price for existing home sales was $224,100, up from $208,200 in December 2014. The increase marked December 2015 as the 46th month in a row of year-over-year gains for the median price. Inventory has also dropped consistently. 

Total housing inventory is 3.8 percent lower than it was a year ago, 1.86 million homes down to 1.79 million, according to the NAR.

“A housing shortage appears to be in the cards,” Mr. Yun said at a press conference for the report. However, on a positive note, Yun added, “buying activity is very steady.”

First-time buyers made up 32 percent of the existing home sales in December, matching the highest percentage since August and a 2 percent increase from November. The trend of first-time home buyers is set to rise in 2016.

Looking at all 2015 existing home sales, 30 percent of the buyers were first-time owners. The low percentage, which the NAR said in a separate study was the lowest level in almost 30 years, was likely caused by high rents and home prices, among other factors.

According to Yun, those same factors that held first-time buyers back in 2015 will still be present in 2016. But first-time buyers will increase due to “strong job growth” and interest in owning from younger buyers.

Other signs of a recovering, but still robust home sales market were also visible. Foreclosures and short sales had further declines in December to 8 percent, down from 11 percent the previous year.  

The 2015 existing sales numbers (5.46 million) are the best since 2006 (6.48 million), according to NAR data.

"While the carryover of November's delayed transactions into December contributed to the sharp increase, the overall pace taken together indicates sales these last two months maintained the healthy level of activity seen in most of 2015," said Yun in the press release.