Existing-home sales decline in December after 2 months of gains

High mortgage rates led to slower sales, but declining rates may make for a strong spring, according to NAR economist

Existing-home sales declined 6.4 percent from November to December to a seasonally adjusted rate of 4.99 million, after two straight months of consecutive gains, according to the latest data from the National Association of Realtors (NAR). None of the four regions that NAR tracks saw month-over-month gains in sales.

“The housing market is obviously very sensitive to mortgage rates,” NAR Chief Economist Lawrence Yun said. “Softer sales in December reflected consumer search processes and contract signing activity in previous months when mortgage rates were higher than today. Now, with mortgage rates lower, some revival in home sales is expected going into spring.”

Despite cooling sales, existing-home prices increased year-over-year for the 82nd consecutive month. The median existing-home price in December was $253,600

Inventory finished the month at a 3.7-month supply, which is down from 3.9 last month but up from 3.2 months in December 2018.

“Several consecutive months of rising inventory is a positive development for consumers and could lead to slower home price appreciation,” Yun said. “But there is still a lack of adequate inventory on the lower-priced points and too many in upper-priced points.”

As sales slow, inventory is increasing, according to Ruben Gonzalez,  the chief economist at Keller Williams.

“Right now, we are seeing and hearing that inventory levels for existing homes have been increasing fairly quickly across the country as home sales continue to trend down,” Gonzalez said. “This is likely going to result in a significant slowing in home price appreciation in a lot of markets over the coming year.”

Gonzalez added that the decline in mortgage rates since November, coupled with smaller than anticipated rate increases this year may also help the housing market in 2019. But despite the stock market calming down, the current state of political turmoil will likely weigh on consumer sentiment.

“The government shutdown is also likely to begin impacting more home sales directly as government-funded agencies involved in various parts of the home purchase process deal with short staffing,” Gonzalez added.

Cheryl Young, the senior economist at Trulia believes the political and economic climate will impact the housing market in 2019.

“Looking ahead to 2019, expect weaker existing-homes sales as the new year ushered in a government shutdown and worsening economic uncertainty,” Young said.

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