Existing-home sales were at a seasonally adjusted annual rate of about 4.99 million in December, down 6.4% compared with November and down 10.3% compared with December 2017, according to the National Association of Realtors (NAR).
Regionally, sales fell 11.2% in the Midwest, 6.8% in the Northeast, 5.4% in the South and 1.9% in the West, on a year-over-year basis.
The drop follows two consecutive months of increases.
NAR includes sales of townhouses, condominiums and co-ops in its results.
Interestingly, the dip in sales in December coincided with a dip in mortgage rates that same month. However, one must bear in mind that most of the home sales that closed in December went to contract in November, when rates were higher.
NAR notes that the average rate for a 30-year, fixed-rate mortgage – based on data from Freddie Mac – decreased to 4.64% in December, down from 4.87% in November.
The higher rates the previous month are likely what led to the sharper-then-usual drop-off in home sales in December.
“The housing market is obviously very sensitive to mortgage rates,” says Lawrence Yun, chief economist for NAR, in a statement. “Softer sales in December reflected consumer search processes and contract signing activity in previous months when mortgage rates were higher than today. Now, with mortgage rates lower, some revival in home sales is expected going into spring.”
The median existing-home price for all housing types in December was $253,600, up 2.9% from $246,500 in December 2017.
December marked the 82nd straight month that U.S. home prices increased on an annual basis.
As of the end of December, there were about 1.55 million existing homes for sale, down from 1.74 million in November, but up from1.46 million a year earlier.
That’s a 3.7-month supply at the current sales pace.
Properties typically stayed on the market for 46 days in December, up from 42 days in November and 40 days a year ago.
Thirty-nine percent of homes sold in December were on the market for less than a month.
“Several consecutive months of rising inventory is a positive development for consumers and could lead to slower home price appreciation,” says Yun. “But there is still a lack of adequate inventory on the lower-priced points and too many in upper-priced points.”
John Smaby, president of NAR, says although the partial shutdown of the federal government “has not had a significant effect on December closings … the uncertainty of a shutdown has the potential to harm the market.”
“Once the government is fully reopened, I am hopeful that housing transactions will increase,” Smaby adds.
First-time buyers represented 32% of sales in December, down from 33% in November but flat compared with a year earlier.
All-cash sales accounted for 22% of transactions in December, up from 21% in November and 20% a year earlier.
Individual investors, who account for many cash sales, purchased 13% of homes in December, the same as November but down from 16% in December 2018.
Distressed sales – foreclosures and short sales – represented 2% of sales in December, down from 5% a year earlier.