Existing Home Sales Continue Upward Trend

December levels are 3.6% higher than one year ago; existing inventory dwindles; glimmers of a sustained housing recovery taking shape.

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Existing-home sales continued on an uptrend in December, rising for three consecutive months and remaining above a year ago, according to the National Association of Realtors.

The latest monthly data shows total existing-home sales rose 5% to a seasonally adjusted annual rate of 4.61 million in December from a downwardly revised 4.39 million in November, and are 3.6% higher than the 4.45 million-unit level in December 2010. The estimates are based on completed transactions from multiple listing services that include single-family homes, townhomes, condominiums and co-ops.

Lawrence Yun, NAR chief economist, said these are early signs of what may be a sustained recovery. “The pattern of home sales in recent months demonstrates a market in recovery,” he said. “Record-low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market.”

For all of 2011, existing-home sales rose 1.7% to 4.26 million from 4.19 million in 2010.

How low can you go? According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to another record low of 3.96% in December from 3.99% in November; the rate was 4.71% in December 2010; recordkeeping began in 1971.

More homebuyers expected in 2012. Moe Veissi, NAR president and broker-owner of Veissi & Associates Inc. in Miami, said more buyers are expected to take advantage of market conditions this year. “The American dream of homeownership is alive and well. We have a large pent-up demand, and household formation is likely to return to normal as the job market steadily improves,” he said. “More buyers coming into the market mean additional benefits for the overall economy. When people buy homes, they stimulate a lot of related goods and services.”

Working down the housing inventory. Total housing inventory at the end of December dropped 9.2% to 2.38 million existing homes available for sale, which represents a 6.2-month supply at the current sales pace, down from a 7.2-month supply in November.

Available inventory has trended down since setting a record of 4.04 million in July 2007, and is at the lowest level since March 2005 when there were 2.30 million homes on the market.

“The inventory supply suggests many markets will see prices stabilize or grow moderately in the near future,” Yun said.

Stats on foreclosures, prices, and who’s buying what/where

Foreclosures sold for an average discount of 22% in December, up from 20% a year ago, while short sales closed 13% below market value compared with a 16% discount in December 2010.

The national median existing-home price for all housing types was $164,500 in December, which is 2.5% below December 2010. Distressed homes—foreclosures and short sales—accounted for 32% of sales in December (19% were foreclosures and 13% were short sales), up from 29% in November; they were 36% in December 2010.

All-cash sales accounted for 31% of purchases in December, up from 28% in November and 29% in December 2010. Investors account for the bulk of cash transactions.

Investors purchased 21% of homes in December, up from 19% in November and 20% in December 2010. First-time buyers fell to 31% of transactions in December from 35% in November; they were 33% in December 2010.

Contract failures were reported by 33% of NAR members in December, unchanged from November; they were 9% in December 2010. Although closed sales are holding up better than this finding would suggest, contract cancellations are caused largely by declined mortgage applications and failures in loan underwriting from appraised values coming in below the negotiated price.

Single-family home sales increased 4.6% to a seasonally adjusted annual rate of 4.11 million in December from 3.93 million in November, and are 4.3% higher than the 3.94 million-unit pace a year ago. The median existing single-family home price was $165,100 in December, which is 2.5% below December 2010.

Existing condominium and co-op sales rose 8.7% to a seasonally adjusted annual rate of 500,000 in December from 460,000 in November but are 2.0% below the 510,000-unit level in December 2010. The median existing condo price was $160,000 in December, down 3.0% from a year ago.

Regionally, existing-home sales in the Northeast jumped 10.7% to an annual pace of 620,000 in December and are 3.3% above a year ago. The median price in the Northeast was $231,300, which is 2.7% below December 2010.

Existing-home sales in the Midwest rose 8.3% in December to a level of 1.04 million and are 9.5% above December 2010. The median price in the Midwest was $129,100, down 7.9% from a year ago.

In the South, existing-home sales increased 2.9% to an annual level of 1.76 million in December and are 3.5% above a year ago. The median price in the South was $146,900, down 1.1% from December 2010.

Existing-home sales in the West rose 2.6% to an annual pace of 1.19 million in December but are 0.8% below December 2010. The median price in the West was $205,200, up 0.3% from a year ago.