WASHINGTON – Sales of existing U.S. homes edged up slightly in December, helping to lift sales for the year to the highest level in seven years.
Sales increased to an annual rate of 4.87 million units last month, up 1 per cent from the November sales pace, the National Association of Realtors reported Thursday. However, both months represented a slower pace of sales than earlier in 2013, reflecting the drag from higher mortgage rates and higher home prices.
For all of 2013, sales totalled 5.09 million, the best performance since 2006, when sales totalled 6.48 million. However, the sales gains in both 2005 and 2006 represented an unsustainable housing bubble. Analysts say a more normal sales pace currently would be around 5.5 million units.
The median price of an existing home rose 11.5 per cent last year to $197,100, the highest in eight years.
Sales of previously owned homes are up 19.5 per cent since 2011 but sales fell from September through November and the December level is still 9.6 per cent below the summer peak.
“We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population,” said Lawrence Yun, chief economist for the Realtors.
Yun is forecasting sales will remain around the 2013 level of 5.09 million in 2014 as such factors as tighter mortgage lending standards and limited inventories impede further progress in the housing market.
Total housing inventory at the end of December was down 9.3 per cent to 1.86 million existing homes available for sale. That represents a 4.6 month supply at the December sales pace.
By region of the country, sales fell 4.3 per cent in the Midwest and were down 1.3 per cent in the Northeast. Sales were up 3 per cent in the South and rose 4.8 per cent in the West.
Over the summer, re-sales reached a pace of 5.39 million, the fastest in four years. But sales began to slow in September as the costs of buying a home rose.
Mortgage rates rose to nearly a full percentage point higher than they were in the spring, when they were at record lows. And a limited supply of homes on the market helped drive up prices. The combination of rising mortgage rates and rising prices made home buying less affordable, particularly for first-time buyers.
Builders started work on 923,000 new homes and apartments in 2013, up 18.3 per cent from 2012. It was the fourth straight annual gain and the strongest construction pace since 2007 when 1.36 million homes were started. Economists are looking for further construction gains in 2014.