Existing-Home Sales Surge Back in December
Led by the South and West, all four major regions of the U.S. saw large increases in December existing-home sales.
Total home sales reached 5.46 million for 2015 — the most in nine years.
It was the highest annual sales total since 2006, the National Association of Realtors reported.
Sales were most brisk in our part of the country.
So what is the forecast for 2016?
Inventories of existing homes for sale fell to 3.9 months of supply in 2015, where 6 months is the healthy average. PLI readers will remember we predicted a housing shortage in 2010, after building permits fell to all-time lows and spec builder foreclosures flooded markets with nearly “new” low price homes. While the 2015 shortage will taper off over the next few years, housing shortages never go away over night.
Rising prices attract sellers, which pumps up inventories for sale. U.S.home prices have increased a breath-taking 25% since the beginning of the recovery in 2011.
The national median home price hit $224,100, gaining 7.4% from last year. Prices are outpacing growth in incomes, so expect prices gains to slow in 2016. That may help sales.
Rising prices also lift owners out from “under water.” “Under water” owners in years past were on home incarceration, since they basically had to pay to sell their homes.
Distress sales — foreclosures and short sales — dropped to about 8% in December, from 11% a year before. They sold at an average discount of 16% below market.
Yet median household incomes have stayed flat, making it harder to afford rising prices. Incomes (of the non-1%) actually are sliding downward slightly when adjusted for inflation, or buying power. Jobs are being created, and another 1.5-2 million probably will be in 2016. But purchasing power is not growing.
Even so, as apartment rents rise, and household formation gets closer to normal, expect overall increases in home sales for 2016. Nearly 9% of renters in recent surveys say owning a home ins their idea of the American dream.
A key missing ingredient in the rebound is first-time home buyers. First-time home buyers were barely 30% of buyers in all of 2015. Usually they are closer to 40%. The annual share of first-time home buyers was at its lowest level in nearly three decades, according to a separate NAR survey in late 2015. http://www.realtor.org/news-releases/2015/11/first-time-buyers-fall-again-in-nar-annual-buyer-and-seller-survey
Improvements in credit availability, especially for first-time home buyers, also can be expected to nudge sales further upward. It looks like there is unusually high pent up demand.
It also is time to start keeping an eye on multi-generational and shared use home floor plans, in the era of AirBnb, and growing needs for senior care. Take a look at PLI’s review of the Vegas New AmericanHome article next door in this issue.