Existing-home sales closed out 2016 as the best year in a decade, even as sales declined in December as the result of ongoing affordability tensions and historically low supply levels, according to the National Association of Realtors (NAR).
At the end of 2016, NAR recorded 5.45 million existing-home sales, surpassing the 2015 level of 5.25 million and hitting the highest level since the 6.48 million mark in 2006. But the year ended on a whimper rather than a bang: existing sales decreased 2.8 percent last month to a seasonally adjusted annual rate of 5.49 million in December from an upwardly revised 5.65 million in November. On a year-over-year measurement, December’s sales are only 0.7 percent higher than the December 2015 level.
"While a lack of listings and fast rising home prices was a headwind all year, the surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end," said NAR Chief Economist Lawrence Yun.
The median existing-home price for all housing types in December was $232,200, up four percent from the $223,200 level of one year ago. December's price increase was the 58th consecutive month of year-over-year gains. But the total housing inventory at the end of December dropped 10.8 percent to 1.65 million existing homes available for sale, which is the lowest level since NAR began tracking the supply of all housing types in 1999. Inventory is 6.3 percent lower than a year earlier (1.76 million) and has tumbled year-over-year for 19 straight months.
"Housing affordability for both buying and renting remains a pressing concern because of another year of insufficient home construction," said Yun. "Given current population and economic growth trends, housing starts should be in the range of 1.5 million to 1.6 million completions and not stuck at recessionary levels. More needs to be done to address the regulatory and cost burdens preventing builders from ramping up production."
