Existing-Home Sales Decreased to 6.18 million in December
Inventory down 14.2% year-over-year
Existing-home sales declined in December, snapping a streak of three straight months of gains, according to the National Association of Realtors®. Each of the four major U.S. regions witnessed sales fall in December from both a month-over-month and a year-over-year basis. Despite the drop, overall sales for 2021 increased 8.5%.
Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 4.6% from November to a seasonally adjusted annual rate of 6.18 million in December. From a year-over-year perspective, sales waned 7.1% (6.65 million in December 2020).
Total housing inventory at the end of December amounted to 910,000 units, down 18.0% from November and down 14.2% from one year ago (1.06 million). Unsold inventory sits at a 1.8-month supply at the present sales pace, down from 2.1 months in November and from 1.9 months in December 2020.
The sales rate was below the consensus forecast, as expected by housing economist Tom Lawler.
This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.
Sales in December (6.18 million SAAR) were down 4.6% from last month and were 7.1% below the December 2020 sales rate.
Some of the increase in sales since the beginning of the pandemic was probably related to record low mortgage rates, strong second home buying, a strong stock market and favorable demographics.
The second graph shows existing home sales by month for 2020 and 2021.
This was the fifth consecutive month with sales down year-over-year. Sales will likely be down YoY in January 2022 too since were exceptionally strong last Winter.
The third graph shows existing home sales for each month, Not Seasonally Adjusted (NSA), since 2005.
Sales NSA in December (503,000) were 6.5% below sales in December 2020 (538,000). This decrease, NSA, is similar to the increase in the markets I track each month.
Annual sales of 6.12 million were up 8.5% from 2020, and the highest annual level since 2006.
Housing Inventory is at Record Low
The fourth graph shows nationwide inventory for existing homes.
According to the NAR, inventory decreased to 0.92 million in December from 1.11 million in November. Inventory usually declines significantly in November and December as potential sellers remove their homes from the market for the holidays. Inventory is now at a record low.
Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The fifth graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.
Inventory is very low and was down 14.2% year-over-year (YoY) in December. Also, as housing economist Tom Lawler has noted, the local MLS data shows an even larger decline in active inventory (the NAR appears to include some pending sales in inventory). Lawler noted:
"As I’ve noted before, the inventory measure in most publicly-released local realtor/MLS reports excludes listings with pending contracts, but that is not the case for many of the reports sent to the NAR (referred to as the “NAR Report!”), Since the middle of last Spring inventory measures excluding pending listings have fallen much more sharply than inventory measures including such listings, and this latter inventory measure understates the decline in the effective inventory of homes for sale over the last several months."
It seems likely that active inventory is down close to 28% year-over-year.
Months-of-supply at 1.8 months is a new record low and could decline further in January.
It is possible inventory will be up year-over-year sometime in 2022, but inventory will still be at very low levels.
Median House Price Growth Still Strong
On prices, the NAR reported:
The median existing-home price for all housing types in December was $358,000, up 15.8% from December 2020 ($309,200), as prices rose in each region. The South witnessed the highest pace of appreciation. This marks 118 straight months of year-over-year increases, the longest-running streak on record.
Median prices are distorted by the mix (repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices).
The YoY change in the median price peaked at 23.6% in May and slowed to 12.7% in October (still very strong increase in prices). But has picked up a little again.
Finally, as usual, housing economist Tom Lawler's forecast was closer to the NAR report than the Consensus. The NAR reported 6.18 million SAAR, Lawler estimated the NAR would report 6.33 million SAAR, and the consensus was 6.45 million SAAR.
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