Existing home sales in the United States fell 2.8% year on year in December but the nation saw its best year in a decade for residential real estate, the latest index data shows.
Ongoing affordability tensions and historically low supply levels contributed to the fall in sales at the end of 2016 but at 5.45 million they were the highest since 2006. But prices were up 4% and have risen for 58 months in a row.
But the dip at the end of the year meant that currently sales are only 0.7% higher than a year ago, the data from the National Association of Realtors (NAR) also shows, and the median price reached $232,200.
According to NAR chief economist Lawrence Yun solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market. But higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.
‘While a lack of listings and fast rising home prices was a headwind all year, the surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end,’ Yun said.
Indeed, total housing inventory at the end of December dropped 10.8%, the lowest level since NAR began tracking the supply of all housing types in 1999. Inventory is 6.3% lower than a year ago and has fallen year on year for 19 months in a row.
‘Housing affordability for both buying and renting remains a pressing concern because of another year of insufficient home construction. Given current population and economic growth trends, housing starts should be in the range of 1.5 million to 1.6 million completions and not stuck at recessionary levels. More needs to be done to address the regulatory and cost burdens preventing builders from ramping up production,’ Yun explained.
First time buyers purchased 32% of sales in December, unchanged both from November and a year ago. First time buyers also represented 32 percent of sales in all of 2016.
‘Constrained inventory in many areas and climbing rents, home prices and mortgage rates means it’s not getting any easier to be a first time buyer. It’ll take more entry level supply, continued job gains and even stronger wage growth for first timers to make up a greater share of the market,’ Yun pointed out.
Properties typically stayed on the market for 52 days in December, up from 43 days in November but down from a year ago when it was 58 days. Short sales were on the market the longest at a median of 97 days in December, while foreclosures sold in 53 days and non-distressed homes took 50 days. Some 37% of homes sold in December were on the market for less than a month.
All-cash sales accounted for 21% of transactions in December, unchanged from November and down from 24% a year ago. Individual investors, who account for many cash sales, purchased 15% of homes, up from 12% in November and unchanged from a year ago while 59% of investors paid in cash in December.
Distressed sales rose to 7% in December, up from 6% in November but down from 8% a year ago with 5% foreclosures and 2% short sales. Foreclosures sold for an average discount of 20% below market value in December, up from 17% in November, while short sales were discounted 10%, down from 16% in November.