E Economics

December Existing Home Sales Fell Short Of Expectations

20 January, 2022
Existing Home Sales

As I expected, Existing home sales surprised downward in December. According to the National Association of Realtors (NAR), they decreased by 4.6% MoM, reaching 6.18M, well below the final consensus of 6.42M.

1. Housing affordability deteriorated amid rising mortgage rates and prices

Housing affordability has been under pressure since September with rising mortgage rates and prices. The average rate on 30-year fixed mortgage hit 3.7% Tuesday, according to Mortgage News DailyCNBC noted “that is the highest since early April 2020 and now 83 basis points higher than the same time one year ago.

In the meantime, the NAR highlighted that “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.

2. Lack of inventory kept weighting on home sales

One of the recent development related to the the housing market has been the collapse in inventory, which pushed prices upward. The NAR underlined “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.” This pattern was sometimes cited as a dampening factor on transactions. “December saw sales retreat, but the pull back was more a sign of supply constraints than an indication of a weakened demand for housing,” said Lawrence Yun, NAR’s chief economist.