Seasonal Housing Slump Not Stopping Long-Term Recovery
It is not surprising home sales slipped in December and prices were flat.
Seasonal factors, combined with an inventory of existing homes near record lows helped grind home sale and home price growth to a halt in December, compared to November, according to the National Association of Realtors.
Longer-term trends, however, indicate the national housing recovery isn't missing a beat.
Total existing-home sales (single-family homes, condos, townhomes and co-ops) declined 1.0 percent in December compared to November, but were up 12.8 percent from a year ago, according to NAR.
The national median existing-home price for all housing types was $180,800 in December, virtually unchanged from November, but 11.5 percent above December 2011 and representing the 10th consecutive month of year-over-year price gains.
Generating upward pressure on prices, the housing inventory continued it's plunge dropping 8.5 percent from November and 21.6 percent below a year ago to the lowest level in 12 years, since January of 2001, NAR reported.
Even with tight inventories, sales are booming. NAR's preliminary annual total for existing-home sales in 2012 was 4.65 million, up 9.2 percent from 4.26 million in 2011 and the highest level since 2007.
For all of 2012, the preliminary median existing-home price was $176,600, up 6.3 percent from $166,100 in 2011 - the strongest annual price gain since 2005 when the median price rose 12.4 percent.
Supply and demand
Pent up demand is sustaining the market for now, but a larger inventory would generate more competition, bring even more buyers to market and help sustain home price increases.
"Record low mortgage interest rates clearly are helping many home buyers, but tight inventory and restrictive mortgage underwriting standards are limiting sales," said Lawrence Yun, NAR chief economist.
"The number of potential buyers who stayed on the sidelines accumulated during the recession, but they started entering the market early last year as their financial ability and confidence steadily grew, along with home prices," Yun said.
Low interest rates are expected to continue to help boost sales this year and the economy is pitching in with slow, but steady job growth.
"Both sales and prices will again be higher in 2013," Yun said.
Declining, discounted distressed sales also continue to boost prices.
Foreclosures and short sales together accounted for 24 percent of December sales, down from 32 percent in December 2011. Foreclosures sold for an average discount of 17 percent below market value in December, while short sales were discounted 16 percent, NAR said.
Homes are flying off the shelves.
Homes were on the market a median 73 days in December, up from 70 days in November, but more than 26 percent below 99 days in December 2011.
Thirty-one percent of all homes sold in December were on the market for less than a month.
"Although tight inventory is limiting home sales in many areas, overall sales are expected to stay on an upward trend. The biggest impact of tight inventory is upward pressure on home prices, but after values fell below replacement construction costs, prices are still affordable in most of the country," said NAR President Gary Thomas, broker-owner of Evergreen Realty.
First-time buyers accounted for 30 percent of purchases in December, compared to 31 percent a year ago.
All-cash sales comprised 29 percent of December's transactions compared to 31 percent in December 2011. Most cash sales, 21 percent were by investors, the same as a year ago.
On a year-over-year basis, condo sales and activity in the Midwest and South led the market.
Condo sales growth, rising 22.9 percent on the year, outpaced sales growth in the typically more expensive single-family home sales sector, which saw sales rise by only 11.5 percent for the year.
For the year, homes sales in the Midwest were up 15.5 percent; up 14.7 percent in the South; up 10.3 percent in the Northeast and up 8.8 percent the West, according to NAR.
Written by Broderick Perkins for www.RealtyTimes.com Copyright © 2012 Realty Times All Rights Reserved.