According to a new report from Redfin, U.S. home-sale prices increased 6.9% year over year in December to a median of $312,500, as well as up 1.1% month over month on a seasonally adjusted basis: the largest increase since February 2018.
“Low mortgage rates and a strong economy fueled home buyer demand in December, which boosted both home sales and prices,” says Redfin chief economist Daryl Fairweather. “Prices heated up in West Coast metros like Seattle and Los Angeles, which indicates the slowdown of 2019 has officially ended in these markets.”
Prices continued to increase the fastest in affordable metro areas in December. Among the 20 metro areas with the largest year-over-year price increases, 16 were below the national median, led in December by Memphis (median price $190,000, up 15.9%), Camden, N.J. ($195,000, +14.7%) and Cincinnati ($187,000, +14.4%).
For the more expensive metro areas, a boost in the loan limits for mortgages backed by FHA, VA, Fannie Mae and Freddie Mac that takes effect in January could impact affordability and put upward pressure on home prices in the sweet spot of the limit increases. The new limit for most of the country is $510,400, up from $484,350 in 2019, while the limit in high-cost areas has increased to $765,600, up from $726,525 in 2019.
Of the 85 largest metro areas Redfin tracks, only two saw a year-over-year decline in the median sale price: In New York, home prices were down 2.4%, possibly as a result of the increase in New York City’s “mansion tax” on homes priced above $1 million. In San Francisco, they fell 1.7%.
The markets with the biggest increases in home sales from a year ago were Anaheim, Calif. (37.7%), North Port, Fla. (35.8%) and New Haven, Conn. (23%).
The supply of homes for sale fell 14.9% year over year – the biggest decline since March 2013 and the sixth straight month of declines. There were fewer homes for sale last month than any time since at least December 2012, according to Redfin. Just one of the 85 largest metros tracked by Redfin posted a year-over-year increase in inventory: Knoxville, Tenn. (5.3%).
Compared to a year ago, the biggest declines in the number of homes for sale were in Salt Lake City (-54.7%), Tacoma, Wash. (-44.3%) and San Diego (-40.3%).
The rapid reduction in supply can be attributed both to the increase in home sales and to a decline in new listings, which fell 5.1% in December from a year earlier – the largest drop on record since Redfin’s data began in 2012.
“Many homeowners have refinanced their mortgages to take advantage of low interest rates and therefore feel committed to staying put,” says Fairweather. “The lack of homes for sale is going to fuel competition and price growth in 2020.”
Seasonally adjusted new listings in December fell the most from a year earlier in Salt Lake City (-50.4%), followed by Allentown, Pa. (-39.3%) and Kansas City (-38.9%).
Also, homes sold in December spent two fewer days on market compared to the prior year. In December, the typical home went under contract in 50 days, compared to 52 days in December 2018.
Moreover, the share of homes sold above list price increased year over year, coming in at 19.1% in December compared to 17.3% a year earlier.
To read the full report, click here.