Despite two prior months of consecutive growth, existing-home sales dipped at the end of 2018.
Total existing-home sales — which are completed transactions for single-family homes, townhomes, condos, and co-ops — decreased 6.4 percent from November to December, according to the National Association of Realtors’ existing-home sales report that was released Tuesday. Sales are also down 10.3 percent from a year ago.
Many economists argue that the decline is thanks in large part to hikes in mortgage rates, including Lawrence Yun, NAR’s chief economist. In December, the 30-year fixed-rate mortgage averaged 4.64 percent, whereas, in all of 2017, 30-year rates averaged 3.99 percent.
“The housing market is obviously very sensitive to mortgage rates,” Yun says. “Softer sales in December reflected consumer search processes and contract signings 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.”
Economists, however, are optimistic that the existing-home sale trend will improve in the spring. Mortgage rates are starting to shrink, Freddie Mac said, reporting that the 30-year fixed-rate mortgage averaged 4.45 percent last week.
Another looming danger to the economy, in general, is the partial government shutdown, which on Wednesday enters its 33rd day. The shutdown of the federal government likely didn’t affect home sales in December but it could the future, said John Smaby, NAR president.
“The uncertainty of a shutdown has the potential to harm the market,” Smaby said. “Once the government is fully reopened, I am hopeful that housing transactions will increase.”
Here are some other important figures from the National Association of Realtors’ existing-home sales report:
- December’s median existing-home price for all housing types was $253,600, up 2.9 percent from December 2017.
- Total housing inventory at the end of December fell to 1.55 million, down from 1.74 million existing homes available for sale in November. Unsold inventory is at a 3.7-month supply if the current sales pace maintains.
- Properties stayed on the market for an average of 46 days in December, up from 40 days in December 2017. Thirty-nine percent of homes that sold in December were on the market for less than a month.
- Distressed sales: Foreclosures and short sales represented only 2 percent of sales in December, down from 5 percent in December 2017.