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Existing home sales increased by 14.7% m/m in December, rising to 5.46 million units (annualized). The reading was well-above the consensus forecast, which called for a 5.20 million print. The December gain more-than-reversed the 10.5% decline experienced during the prior month, which was largely related to the implementation of a new mortgage application process.
The majority of the advance in December was concentrated in single family (16.1% m/m) homes, which rebounded from last month's double-digit decline. Sales of condos and co-ops (4.9% m/m) remained in positive territory for a second consecutive month.
On a year-over-year basis, the median sales price was up by 7.6% - accelerating from last month's 6.3% y/y reading and some 2 percentage points above the average gain during the last 6 month. The single-family segment led the gains, up by 8.0% y/y, while condo and co-op prices advanced by a more subdued 4.9% y/y.
Reflecting the rebound in sales this month, inventory of existing for-sale homes - measured in months' supply - tightened to 3.9 months in December from 5.1 a month earlier.
The share of first-time home buyers edged up to 32% in December. The portion of sales by those who previously did not own a home is now 2pp higher than the month prior and 3pp above year ago levels.
Investors purchased 15% of homes in December, down 1pp from the prior month and 2pp from a year ago.
As broadly expected, existing home sales rebounded in December, confirming that November's exceptionally weak report was largely a result of temporary factors, with the new mortgage application regulation delaying contract closings and pushing some sales from November into the next month.
All in all, market fundamentals that remain strong, and looking beyond the last couple months of atypical volatility, existing home sales have made considerable headway in 2015. For the year as a whole, sales have averaged 5.23 million units. This is up 6.3% from 2014 levels and is the highest tally since 2006.
The one particularly encouraging element in this morning's report is the higher share of first-time home buyers, which while still low relative to history, is showing positive trends. While the for-sale inventory has caused prices to rise, impinging on affordability - which is a foremost concern for many first-time homebuyers - affordability on the whole still remains good and should continue to be supported by the still low interest rate environment.
"Borrowing costs will indeed remain low, despite the Fed embarking on a tightening cycle, in light its very gradual pace and downward pressure on long-term yields related to global weakness. Alongside ongoing labor market improvements, rising incomes, rebounding household formation, and improving household balance sheets we expect that the upturn in resale activity will continue this year", says TD Economics.
