NAR: Lack of Inventory Held Housing Market Back in 2017

Existing-home sales reached an adjusted annual pace of about 5.51 million as of the end of December 2017, a decrease of 3.6% compared with November but an increase of 1.1% compared with December 2016, according to the National Association of Realtors.

Total existing-home sales for 2017 reached the highest pace since 2006, when the annual rate was 6.48 million.

Regionally, existing-home sales for December were down 7.5%, month-over-month, in the Northeast; down 6.3% in the Midwest; down 1.7% in the South; and down 1.6% in the West.

Still, existing-home sales in 2017 were up 1.1% compared with 2016.

When looking at certain market factors – such as strong home price appreciation and the lowest delinquency and foreclosure rates in a decade – the housing market “performed remarkably well” in 2017, says Lawrence Yun, chief economist for NAR, in a statement.

“Existing sales concluded the year on a softer note, but they were guided higher these last 12 months by a multi-year streak of exceptional job growth, which ignited buyer demand,” Yun says.

“At the same time, market conditions were far from perfect,” he adds. “New listings struggled to keep up with what was sold very quickly, and buying became less affordable in a large swath of the country. These two factors ultimately muted what should have been a stronger sales pace.”

The big problem for the housing market in 2017, of course, was lack of supply.

“The lack of supply over the past year has been eye-opening and is why, even with strong job creation pushing wages higher, home price gains – at 5.8 percent nationally in 2017 – doubled the pace of income growth and were even swifter in several markets,” Yun says.

This lack of supply resulted in closings scaling back in most areas last month.

“Affordability pressures persisted, and the pool of interested buyers at the end of the year significantly outweighed what was available for sale,” he says.

The lack of supply helped push the average price for a single-family home in the U.S. to $246,800 in December, up 5.8% from $233,300 in December 2016.

December’s price increase marks the 70th straight month of year-over-year gains.

As of the end of December, there were about 1.48 million existing homes available for sale – about a 3.2-month supply, at the current sales pace.

That’s about 10.3% less inventory than was available a year ago. Total inventory has now fallen year-over-year for 31 consecutive months. It is at the lowest level since NAR began tracking it in 1999.

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