Existing-Home Sales Up 12.3% in December

The end of the year provided some hope for the real estate market as existing-home sales were up 12.3% in December. This figure is still 2.9% below from …

The end of the year provided some hope for the real estate market as existing-home sales were up 12.3% in December. This figure is still 2.9% below from this time last year and some economists are not forecasting significant improvement for another two to three years. See the following article from The Street for more on this.  

Existing-home sales rose 12.3% in December to a seasonally adjusted annual rate of 5.28 million units, the National Association of Realtors said Thursday morning.

Economists’ consensus call had been for the figure to come in at 4.8 million units, according to estimates listed on Briefing.com, compared with a rate of 4.68 million units sold in November.

While the rate improved, it remained 2.9% below the 5.44 million units recorded in December 2009.

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"December was a good finish to 2010, when sales fluctuate more than normal," said Lawrence Yun, NAR chief economist. "The December pace is near the volume we’re expecting for 2011, so the market is getting much closer to an adequate, sustainable level."

The national median existing-home price for all housing types was $168,800 in December, up 1% year-over-year.

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Distressed homes accounted for 36% of all existing-home sales last month, up slightly from a 33% share in November.

Total housing inventory at the end of December fell 4.2% to 3.56 million homes available for sale. That represents a 8.1-month supply at the current sales pace, down from a 9.5-month supply in November.

Pending home sales rebounded 3.5% in November but remained 20.5% lower than in the year-earlier month. Data on December’s pending home sales is expected to be reported on Jan. 27.

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New-home sales rose 5.5% in November but were 21.2% below year-earlier levels. Sales of newly built homes are expected to have risen to an annualized rate of 300,000 in December, from 290,000 in November. December’s new-home sales data is expected to be released on Jan. 26.

On Wednesday the Commerce Department reported that applications for building permits spiked 16.7% in December, pointing to potential strengthening in demand for future homebuilding activity, though homebuilders began construction on 4.3% fewer homes in the month.

"As we emerge from the traditionally slow holiday season, builders continue to look for signs of improvement in the economy, home buyer demand and builder and consumer credit conditions," said Bob Nielsen, a home builder from Reno, Nev. and 2011 chairman of the National Association of Home Builders.

Though a restrained level of optimism is fair, the short-term housing picture remains fairly grim.

"At this point, housing remains on the sidelines of a weak economic recovery as consumers and builders wait for clear and consistent indications that jobs and economic output are reviving," said NAHB Chief Economist David Crowe. "Meanwhile, the problems that builders continue to confront in obtaining production financing, and in maintaining performing lines of credit, threaten to significantly slow the onset of a housing recovery."

A shadow inventory of homes could take two to three years to clear to a point where housing supply and demand begin to match up, Kevin Brungardt, CEO of RoundPoint Financial, a mortgage origination and servicing firm, told the TheStreet last month. No acknowledged housing bottom will appear until that shadow inventory is significantly curtailed, he said.

Homebuilders should expect material dampening of new-home purchases until then, Brungardt forecast. Current homeowners will also continue to be impacted unfavorably.

The homebuilder sector is well off its late-spring peak, when buyers were rushing to take advantage of federal tax credits for homebuyers, and is only slightly higher than at the beginning of 2010. Whereas other sectors have begun a rebound in earnest, the housing sector continues to lag.

The SPDR S&P Homebuilders (XHB), an exchange-traded fund that tracks the homebuilder sector, remains around 60% off its peak of $46.08 in early 2006. The iShares Dow Jones US Home Construction (ITB) ETF remains more than 70% off its peak of $50.10 in the spring of 2006.

This article has been republished from The Street. You can also view this article at The Street, a site covering financial news, commentary, analysis, ratings, business and investment content.

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