The latest data from the National Association of Realtors shows that existing home sales in the United States, which were performing bearishly at some points in the year, ended the year on the right foot, finishing at an annualized rate of more than 5 million units sold.
This was the sixth time in seven months that existing home sales had broken the 5 million mark in annualized sales, and that was not the only positive takeaway from the NAR’s December 2014 report. Median home prices ticked up by only 5.8 percent year-over-year to $208,500, and not only was this a slower, healthier increase than the double-digit hikes reported in previous months, this also put median home prices at their highest level in seven years.
Total existing home sales, which encompass single family homes, town homes, condominiums, and co-ops, improved by 2.4 percent from November 2014’s data, and by 3.5 percent from December 2013’s data.
In a statement, NAR chief economist Lawrence Yun described how existing home sales were up in December 2014 after a year that had started rather slowly, only for business to pick up in the second half of the calendar year. “Home sales improved over the summer once inventory increased, prices moderated and economic growth accelerated. Sales were measurably better in the second half, up 8% compared to the first six months of the year,” read Yun’s statement in part.
However, there were a few signs that affordability may be compromised in the coming months, such as a decline of inventory to 1.85 million existing homes available for sale, or 4.4 months at the current pace. That is down 11.1 percent from November’s supply of 5.1 months.
According to Yun, the above mentioned drop in inventory may “raise some affordability concerns,” though the operative word may be “some.” Though rapid home price appreciation is never good for would-be home buyers, especially first-time buyers, there are some positive trends in the mortgage market nowadays, such as interest rates below 4 percent for 30-year fixed mortgage products, and the general improvement of the U.S. economy.
But there are bound to be problems nonetheless should housing supply indeed drive home prices up more significantly. “Housing costs, both rents and home prices, continue to outpace wages and are burdensome for potential buyers trying to save for a down payment while looking for available homes in their price range,” said Yun.
This may also result in a lower percentage of first-time home buyers entering the market, as first-timers only took up 29 percent of the market in December. That is down from the 31 percent share in November, but still slightly higher than the year-ago share of 27 percent. For the whole of 2014, first-time home buyers again took up 29 percent of the total market.
As for other interesting takeaways from the NAR report, foreclosures, distressed sales, and short sales ticked up a bit in December, advancing to 11 percent from 9 percent the month before, but were still down from December 2013’s share of 14 percent. Properties also stayed on the market for about as long as they did in November (66 days), but for a shorter time than they did a year prior, when they stayed on market for 72 days.