US existing home sales rose to a 10-month high in December, according to Reuters
By Lucia Muticani
WASHINGTON (Reuters) – U.S. existing home sales rose to a 10-month high in December, but further gains are likely to be limited by higher mortgage rates and home prices, putting many prospective buyers on the sidelines.
Home sales rose 2.2% last month to a seasonally adjusted annual rate of 4.24 million units, the highest level since February, the National Association of Realtors said on Friday.
Economists polled by Reuters had forecast domestic sales to rise to 4.19 million units. Sales rose 9.3 percent year-over-year, the biggest increase since June 2021.
A total of 4.06 million homes were sold last year, the lowest since 1995.
“Home sales showed a strong recovery in the final months of the year despite higher mortgage rates,” said Laurence Yun, chief economist at NAAR. “The increase in jobs and wages, the increase in inventory, are having a positive effect on the market.”
Research from a mortgage finance agency Fannie Mae (OTC:) Wednesday predicted weak existing home sales in the first half of the year, saying “new homes will be more affordable and more available than existing homes.” The popular 30-year fixed-rate mortgage is forecast to average 6.7% in the first quarter and 6.6% in the second quarter.
Mortgage rates rose late last year along with U.S. Treasury yields, buoyed by economic resilience, particularly a jump in the labor market, and investors worried that President Donald Trump’s plan for tax cuts, sweeping tariffs and mass deportations could fuel inflation.
The Federal Reserve has cut its expectations for interest rate cuts this year to just two, from the four it forecast in September, as it kicks off its policy-making cycle. The average rate on a 30-year fixed-rate mortgage is less than 7 percent.
Housing inventory fell 13.5% to 1.15 million units last month. Supply increased by 16.2 percent from a year ago. The median existing home price rose 6.0% to $404,400 in December from a year ago, and is set to hit a record high of $407,500 in 2024.
At December’s sales pace, it will take 3.3 months to exhaust the inventory of existing homes, compared with 3.1 months a year ago. A four to seven month supply is seen as a healthy balance between supply and demand.
Properties typically stayed on the market for 35 days in December, compared to 29 days a year ago. First-time buyers accounted for 31% of sales versus 29% a year ago. In 2024, they hit a record low of 24 percent. Economists and realtors say a 40% share is needed for a strong housing market.
All-cash sales accounted for 28% of transactions last month, down from 29% a year ago. Distressed sales, including foreclosures, represented just 2% of sales, unchanged from last year.