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Tighter inventory, underwriting squeeze existing home sales

Existing homes sales eased in December, while limited inventory maintained the upward momentum in home prices. 

Total existing home sales declined 1.0% to a seasonally adjusted annual rate of 4.94 million in December from a downwardly revised 4.99 million in November. However, existing home sales are 12.8% above the 4.38 million-unit level from the previous year, the National Association of Realtors said in a report on Tuesday.

"Record low mortgage interest rates clearly are helping many home buyers, but tight inventory and restrictive mortgage underwriting standards are limiting sales," said NAR Chief Economist Lawrence Yun.

He added, "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." 

Total housing inventory fell 8.5% to 1.82 million existing homes available for sale, representing a 4.4-month supply at the current sales pace. This is down from 4.8 months in November, which is the lowest housing supply since May of 2005 when it was 4.3 months, nearing the peak of the housing boom.

Listed inventory was 21.6% below year-ago levels when there was a 6.4-month supply. Additionally, raw unsold inventory is at its lowest level since Jan. 2001, when there were 1.78 million homes on the market.

In December, the national median existing home price for all housing types was $180,800, up 11.5% from last year. This represents ten consecutive months of year-over-year price gains. 

Distressed homes accounted for 24% of December sales — with 12% foreclosures and 12% short sales – up from 22% from the previous month, but below the 32% share from last year.

Affordability conditions are expected to be fairly stable in the near term.

"Although mortgage interest rates should gradually rise as the year progresses, they're expected to stay below 4% during the first half of the year, meaning qualified buyers generally can stay well within their means," said NAR President Gary Thomas.

He added, "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."

The median time on market for all homes was 73 days in December, up from 70 days last month. However, this was 26.3% below 99 days from a year earlier. 

First-time buyers accounted for 30% of purchases, which was unchanged from last month.

Single-family home sales also slipped 1.4% to a seasonally adjusted annual rate of 4.35 million in December from 4.41 in November. The median existing single-family home price was $180,300 in December, up 10.9% from the previous year.

Regionally, existing home sales fell the most in the Midwest, declining 5.9% to a pace of 1.12 million. Yet, sales remain 15.5% higher than a year ago.

The West was the only region to witness a rise in existing home sales. The West rose 5.1% to a pace of 1.23 million in December and was 8.8% higher than last year.

"Likely job creation and household formation will continue to fuel that growth. Both sales and prices will again be higher in 2013," Yun said. 

cmlynski@housingwire.com

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