U.S. existing home sales fall in December, sales activity to stay supported in months ahead

U.S. existing home sales dropped in December, coming in slightly below consensus expectations. Sales fell 2.8 percent to 5.49 million, as compared with market projections for a pullback to 5.52 million. Existing home sales for the month of November were upwardly revised by 40,000 to 5.65 million. In spite of the decline at the end of year, 2016 has been the best sales year since 2006, noted TD Economics in a research report.

The fall in sales was mostly concentrated in the condo/co-op segment where transactions dropped 10.3 percent to 610,000. This reversed almost all of November’s gain.  Sales in the single family segment retreated by a more moderate 1.8 percent to 4.88 million.

Sales activity dropped throughout most regions, falling in the Northeast, West and Midwest, whereas staying the same in the South.  The inventory of homes available for sales kept on contracting, dropping to 1.65 million, which is down 6.3 percent year-on-year.

The level of inventory came to just 3.6 months’ worth of supply at the current sales pace, underlining the tightness of the existing home market. In spite of the low inventory, the upward pressure on the median home prices moderated a bit, with home values gaining 4 percent year-on-year in December, a deceleration from the rate seen throughout 2016.

The fall in home sales in December was greatly expected. The recent months’ strength could be partially linked to the interest rates rise that pulled forward some contract signing as consumers hurried to lock in the still-low rates, stated TD Economics.

Home purchasing is expected to face more headwinds in the future that include low inventory levels, higher mortgage rates and recovering prices. However, this confluence of factors is unlikely to totally derail the housing rebound. With the economy still on a strong footing, sales activity is expected to stay quite supported near the current level in the next few months, according to TD Economics.

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