Where are home sales headed?
Realtors: Strength hinges on job market
Existing-home sales experienced a slight increase, growing 1% to a seasonally adjusted rate of 4.87 million in December from a downwardly revised 4.82 million in November, according to the National Association of Realtors latest housing report.
In all of 2013, there were 5.09 million home sales, up 9.1% from 2012: the strongest performance since 2006 when sales reached an unsustainable high of 6.48 million at the close of the housing boom.
"It looks as if the job market will expand which suggests another pick up in home sales in 2014. Will it be as big...probably not. We saw almost a 9% gain in 2013, but for 2014 we expect it to be closer to 5% or 6%," said Nationwide Chief Economist David Berson. "If you look at November and December together, they were the weakest months of the year, which was partly due to weather, mortgage rates and continuous home price gains."
Home prices witnessed a slow month in November, recording a slight increase of 0.1% on a seasonally adjusted basis from the previous month, according to the Federal Housing Finance Agency’s house price index.
This marks the 22nd consecutive monthly price increase in the purchase-only seasonally adjusted index.
Over the past year ending in November, house prices were up 7.6%, which is 8.9% below its April 2007 peak and is roughly the same as the April 2005 index level.
The key indicator for housing will be what is going to happen with jobs and whether there is enough of a pickup to offset rates, Berson said. "And I think there will be."
Additionally, the national median existing-home price for all of 2013 came in at $197,100, which is 11.5% above the 2012 median of $176,800: the strongest gain since 2005 when it rose 12.4%.
According to Lawrence Yun, NAR chief economist, housing has experienced a healthy recovery over the past two years.
"Existing-home sales have risen nearly 20% since 2011, with job growth, record low mortgage interest rates and a large pent-up demand driving the market," Yun said. "We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population," he added.
But even with increased home sales, it could mean little without inventory.
Total housing inventory at the end of December fell 9.3% to 1.86 million existing homes available for sale, which represents a 4.6-month supply at the current sales pace, down from 5.1 months in November.
"There still aren’t that many homes for sale relative to demand," Berson said. "There is not enough supply or competition."
Quicken Loans Vice President Bill Banfield says December existing-home sales closed out what turned out to be a promising year for the housing market.
"We saw 2013’s total sales hit a seven-year high, albeit the slump in sales in the fourth quarter," said Banfield.
"Despite the frigid temperatures that hit most of the country, it bodes well for 2014 that sales warmed up for the first time in three months, well ahead of spring selling season," Banfield said.