Washington D.C., USA: Tthe National Association of Realtors released a report on Tuesday showing a much steeper than expected drop in U.S. existing home sales in the month of December – partly reflecting higher interest rates during much of 2018,
NAR said existing home sales plummeted by 6.4 percent to an annual rate of 4.99 million in December after jumping by 2.1 percent to a revised rate of 5.33 million in November.
Economists had expected existing home sales to slump by 1.3 percent to a rate of 5.25 million from the 5.32 million originally reported for the previous month.
With the much bigger than expected decrease, existing home sales tumbled to their lowest level since November of 2015.
The report also said existing home sales in December were down by 10.3 percent compared to an annual rate of 5.56 million in the same month a year ago.
“The housing market is obviously very sensitive to mortgage rates,” said NAR’s chief economist Lawrence Yun.
“Softer sales in December reflected consumer search processes and contract signing activity in previous months when mortgage rates were higher than today,” he added. “Now, with mortgage rates lower, some revival in home sales is expected going into spring.”
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NAR said the median existing home price for all housing types in December was $253,600, down 1.4 percent from $257,300 in November but up 2.9 percent from $246,500 a year ago.
While total housing inventory dropped to 1.55 million existing homes available for sale at the end of December from 1.74 million at the end of November, inventory is up from 1.46 million in December of 2017.
The unsold inventory represents 3.7 months of supply at the current sales pace, down from 3.9 months in November but up from 3.2 months a year ago.
“Several consecutive months of rising inventory is a positive development for consumers and could lead to slower home price appreciation,” said Yun. “But there is still a lack of adequate inventory on the lower-priced points and too many in upper-priced points.”
The report said single-family home sales plummeted by 5.5 percent to an annual rate of 4.45 million in December, while existing condominium and co-op sales nosedived by 12.9 percent to a rate of 540,000.
“The partial shutdown of the federal government has not had a significant effect on December closings, but the uncertainty of a shutdown has the potential to harm the market,” said NAR President John Smaby. “Once the government is fully reopened, I am hopeful that housing transactions will increase.”
Why Markets Care About Existing Home Sales Also Called Home Resales
Existing Home Sales report is released monthly, about 20 days after the month ends, by the National Association of Realtors (NAR).
It measures annualized number of residential buildings that were sold during the previous month, excluding new construction. While this is monthly data, it’s reported in an annualized format (monthly figure x12).
The Existing-Home Sales data measures sales and prices of existing single-family homes for the nation overall, and gives breakdowns for the West, Midwest, South, and Northeast regions of the country. These figures include condos and co-ops, in addition to single-family homes.
Existing Home Sales is a leading indicator of economic health because the sale of a home triggers a wide-reaching ripple effect. For example, renovations are done by the new owners, a mortgage is sold by the financing bank, and brokers are paid to execute the transaction.