Existing Home Sales Fell in December; 2016 Still Best in a Decade

Sales of previously owned homes declined more than forecast in December, data from the National Association of Realtors showed Tuesday. Still, sales for the full year were the strongest since 2006.

Contract closings fell 2.8% to a 5.49 million annual rate last month (the forecast was 5.52 million) after a revised 5.65 million in November. The median sales price rose 4% from a year earlier to $232,200. Inventory of available properties fell to 1.65 million from a year earlier, the lowest since 1999. For all of 2016, existing home sales increased to 5.45 million, the highest since 2006, from 5.25 million a year earlier.

Housing stayed strong as the year came to a close, with solid hiring, faster wage gains, and improved household finances driving demand, though a shortage of listed homes restrained sales. In recent weeks, optimism about President Donald Trump's plans to ease regulations and spur economic growth has triggered a surge in mortgage rates that poses a hurdle for potential buyers in 2017.

"There are just not enough homes available for sale," Lawrence Yun, chief economist at the Realtors group in Washington, told reporters as the data were released. "Without new home construction, we will continue to see home prices easily rising ahead of peoples' incomes."

The Realtors group projects sales in 2017 will rise 1% to 5.52 million. December sales fell in three of four regions and were unchanged in the South. At the current pace, it would take 3.6 months to sell the houses on the market, compared with 3.9 months in November; the Realtors group considers less than a five-month supply as consistent with a tight market.

Single-family home sales decreased 1.8% in December to an annual rate of 4.88 million. Purchases of condominium and co-op units fell 10.3% to a 610,000 pace. First-time buyers accounted for 32% of all sales in December, unchanged from the prior month. Homes sold in 52 days in December, compared with 43 days in November.