US existing home sales have fallen to their lowest rate in over three years, a sign that the housing market continued to dwindle at the close of 2018. Previously-owned homes have sold at the slowest pace since 2015.
Key Takeaways
- The 2018 total tally for existing home sales was 4.99 million, the weakest reading since 2015.
- The report implies that residential real estate remained in a slowdown due to elevated property values and mortgage rates.
- While the growth of home prices is finally slowing down, it still continues to outpace gains in worker pay which is preventing many new buyers from entering the market.
Contract closings fell 6.4% in December compared to the month before, according to the National Association of Realtors. With other housing data delayed due to the government shutdown, the NAR report is likely to be monitored more closely than usual.
The median sales price rose 2.9% annually to $253,600, the smallest increase since February 2012, and inventory increased. A tight labor market is bolstering demand for houses, but the market conditions are undeniably making things difficult for young and indebted buyers. Analysts believe that the housing industry did not significantly contribute to GDP growth in Q4.
Purchases fell nationwide. In the Midwest there was an 11.2% decline with a 6.8% drop in the Northeast. It would take 3.7 months to sell all homes compared to 3.9 months in November – anything under five months of supply is seen as a tight market.
U.S. existing home sales fall to 3-year low
-Fell in all 4 regions, led by 11% drop in Midwest
-Prices rise at the slowest pace in 7 years
-Inventory expands
-Total 2018 home sales weakest in 3 years— Katia Dmitrieva (@katiadmi) January 22, 2019
Expert Outlook
“Affordability is more important than jobs,” NAR Chief Economist Lawrence Yun said at a briefing in Washington. “The housing market is obviously very sensitive to mortgage rates. 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.”
A report from ShowingTime based on data from 1.2 million active listings indicates that home showings were at 7.2% lower in December annually, the fifth consecutive monthly decline.
“Buyer traffic continues to subside across all regions of the U.S. compared to the record numbers recorded at the same time last year,” ShowingTime said in a statement. “This is potentially good news for buyers, who are seeing less competition in the market.”
Bank of America Merrill Lynch economists stated that
“In the very near term, we think we could see a brief period of stronger housing data. The decline in mortgage rates is very well timed ahead of the spring selling season. We suspect that potential homebuyers who may have been scared from the market during the period of rising rates in the fall could see it as an opportunity to jump back in. Moreover, the labor market is currently very strong with a high number of job openings and upward pressure on wages.”
Market Reaction
The price of gold has dipped to session lows following the news, although there is usually an inverse reaction between sentiment on housing market data and the price of gold. Spot gold is trading down -0.06% at $1,280.55/oz with a high of $1,284.78/oz and a low of $1,277.42/oz.