Sales of U.S. existing homes unexpectedly dropped in December as the lowest supply in more than a decade cut into the industry’s best year since 2007.
Purchases fell 1 percent to a 4.94 million annual rate last month, figures from the National Association of Realtors showed today in Washington. The reading was still the second-highest since November 2009. The median forecast of 79 economists surveyed by Bloomberg called an increase to a 5.1 million rate.
Even with December’s setback, 4.65 million homes were sold for all of 2012, the most in five years and a sign the housing market is taking steps toward recovery. The usual drop in supply at this time of year combined with a pickup in demand spurred by historically low mortgage rates, an improving job market and an increasing number of households risks keeping inventories lean, pushing prices up even higher after last year’s rebound.
“This isn’t worrisome at all,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, who projected a drop to a 4.95 million annual rate. “For the first time in a while, it looks like it’s a sellers’ market as much as it’s a buyers’ market. I suspect prices and sales will go up again in 2013.”
Stocks fell, after benchmark indexes climbed to five-year highs last week, on the housing data and as investors weighed corporate earnings reports. The Standard & Poor’s 500 Index fell less than 0.1 percent to 1,484.75 at 11:21 a.m. in New York.
Another report today from Federal Reserve Bank of Richmond showed its manufacturing index fell to minus 12, the lowest level since July, from 5 in December. Readings less than zero signal contraction.
Existing home sales estimates in the Bloomberg survey ranged from 4.89 million to 5.25 million. The prior month’s pace was revised to 4.99 million from a previously reported 5.04 million.
Sales last year climbed 9.2 percent from 4.26 million in 2011.
The median price of an existing home rose to $180,800 last month, up 11.5 percent from $162,200 in December 2011. It was the biggest year-over-year gain since November 2005.
Another measure of prices, the S&P/Case-Shiller index of homes in 20 cities, most recently showed home values increased 4.3 percent in October from a year earlier, the biggest gain since May 2010. The gauge is up almost 9 percent since reaching a 10-year low in March.
The number of previously owned homes on the market dropped to 1.82 million, the fewest since January 2001, according to today’s report. At the current sales pace, it would take 4.4 months to sell those houses, the lowest since May 2005, compared with 4.8 months at the end of November.
“The only concern going into 2013 is the inventory situation,” Lawrence Yun, NAR chief economist, said in a news conference today as the figures were released. “Price increases are almost guaranteed going into 2013,” Yun said, adding that the group’s projection of a 4 percent to 5 percent increase this year may be exceeded.
Record-low borrowing costs underpinned housing gains last year. The average rate on a 30-year, fixed mortgage was 3.38 percent last week, hovering near the 3.31 percent reached a month earlier that was the lowest in data going back to 1972, according to McLean, Virginia-based Freddie Mac.
Progress will probably build in 2013. Sales of existing homes will rise about 7.2 percent to 4.98 million this year, the highest since 2007, according to the median estimate of economists and housing analysts surveyed by Bloomberg. Prices will gain 3.3 percent after an estimated 4.5 percent jump in 2012, according to the forecasters.
“After seven years of navigating an unprecedented market downturn, we finally saw stabilization and recovery in 2012,” Stuart Miller, chief executive officer of Lennar Corp. (LEN), the largest U.S. homebuilder by market value, said during a Jan. 15 earnings call. “While there have been and still are economic and political uncertainties ahead, we feel that this housing recovery is fundamentally based and driven by a long-term demographic need for housing. 2012, therefore, we believe is just the beginning of the recovery.”