Existing Home Sales Fell in December and Supply Remains Extremely Tight
Sales of existing homes decreased 6.0 percent in December, to a 6.10 million seasonally adjusted annual rate. Sales are down 8.3 percent from a year ago.
Sales in the market for existing single-family homes, which account for about 89 percent of total existing-home sales, dropped 5.9 percent in December, coming in at a 5.44 million seasonally adjusted annual rate (see first chart). From a year ago, sales are down 8.1 percent.
Condo and co-op sales fell 7.0 percent for the month, leaving sales at a 660,000 annual rate for the month versus 710,000 in November (see first chart). From a year ago, condo and co-op sales were off 9.6 percent.
The dominant single-family segment saw sales decline in all four regions. Sales fell 6.8 percent in the West, 7.5 percent in the South, the largest region by volume, 1.6 percent in the Northeast, the smallest region by volume, and 4.2 percent in the Midwest. Sales are also down in all four regions measured from a year ago (-17.3 percent in the Northeast, -5.5 percent in the Midwest, -9.8 percent in the West, and -6.0 percent in the South).
Condo and coop sales were down in two regions in December, -20.0 percent in the West and -5.9 percent in the South but were unchanged in the Northeast and the Midwest. From a year go, sales are off in three regions and unchanged in the Midwest.
Total inventory of existing homes for sale fell in December, declining 17.1 percent to 920,000, leaving the months’ supply (inventory times 12 divided by the annual selling rate) down 0.3 months at 1.8.
For the single-family segment, inventory was down 17.7 percent for the month at 790,000 (see second chart) and is 10.2 percent below the December 2020 level. The months’ supply was 1.7, down from 2.0 in the prior month (see third chart).
The condo and co-op inventory fell 15.4 percent to 126,000 (see second chart), pushing the months’ supply down to 2.3 from 2.5 in November. Months’ supply is 20.7 percent below December 2020 (see third chart).
The median sale price in December of an existing home was $354,300, 14.6 percent above the year ago price. For single-family existing home sales in December, the price was $360,300, a 14.9 percent rise over the past year (see fourth chart). The median price for a condo/co-op was $305,200, 12.0 percent above December 2020 (see the fourth chart).
Persistent faster price gains for the single-family segment have resulted in a significant gap developing over the past decade. While median prices were about equal between 2004 and 2014, since 2014, faster price gains for the single-family segment have pushed the median price for existing single-family homes about 18 percent above the median condo price (see fourth chart).
Housing is likely to be volatile over the coming months as fundamentals adjust to changing market conditions. New waves of Covid and more opportunities for employees to work from home are likely to impact demand while supply chain issues and labor difficulties impact supply. Furthermore, the recent jump in mortgage rates may push some buyers out of the market.
Robert Hughes
Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
