Real Estate

Housing experts: DecemberÕ drop in home sales is business as usual

Don't read too much into it

December’s new home sales came in a full 10% lower than November, however, experts aren’t worried.

One expert who served as the CEO for Fannie Mae for more than 20 years explained that it’s not unusual to see volatility in winter months.

“Home sales are often volatile in the winter months, as weather matters a lot, and December’s decline is probably mostly a result of this volatility rather than a drop in the underlying fundamentals for housing demand, despite the rise in mortgage rates,” Nationwide Chief Economist David Berson said.

As another expert puts it, taking the long view is a more accurate picture of where the market is.

“New home sales is a notoriously volatile number, so don't read too much into it,” Brent Nyitray, iServe Residential Lending director of capital markets, said in an email to clients. “The three-month moving average has been pretty steady for the past six months.”

In fact, many experts were more focused on the year as a whole, which showed a 12% increase in new home sales over 2015.

“New home sales in 2016 were the best in nine years, reflecting a combination of solid demand from homebuyers and new homebuilding that has reached post-recession highs,” Trulia Chief Economist Ralph McLaughlin said.

OwnAmerica Founder and CEO Greg Rand explained that month-over-month sales are irrelevant, and that what really matters is the annual comparisons.

Rand explained in an interview with HousingWire that the 12% increase is a positive sign for the industry. “That’s of course what I see in the field, and I think it’s really good news.”

What about the year ahead? Experts explain all signs point to another year of increases.

“We expect 2017 to bring both headwinds and tailwinds for new home sales,” McLaughlin said. “Homebuyers are facing headwinds from higher mortgage rates and uncertainty about tax policy, but low existing inventory, near full employment, and rising wages are tailwinds that will continue to push new home sales higher in the year ahead.”

But these positive outlooks are not shared by everyone. One expert claims today’s report was the exact opposite of what the market really needed to see.

“New home sales missed expectations in December, and instead of finishing 2016 with a bang, sales of newly constructed homes went out with a whimper and actually ended the year down slightly from 2015 — at a time when the market needs the exact opposite,” Zillow Chief Economist Svenja Gudell said. “Combined with missed expectations for existing home sales data earlier this week, 2017 so far doesn’t seem to be shaping up to be a banner year for home buyers.”

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