Existing home sales saw their best annual sales in 10 years, while new home sales tumbled to a 10-month low. Meanwhile, layoffs surged, but remained in safe territory.
Existing Home Sales
Sales of existing homes capped off 2016 as their best year in a decade, according to data released last week by the National Association of Realtors. Transactions of single-family homes, townhomes, condominiums, and co-ops finished 2016 with 5.45 million sales, which ranked as the highest since 2006’s 6.48 million sales.
“Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” NAR Chief Economist Lawrence Yun said. “However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.”
Sales during December dropped 2.8 percent to an annual rate of 5.49 million after November’s pace of 5.65 million. Compared to the same period last year, sales were 0.7 percent higher than December 2015’s sales.
Looking at affordability, the median price for existing homes of all housing types during December grew to $232,200, which was 4 percent higher than December 2015’s average price tag of $223,200. This marked the 58th straight month of year-over-year price increases.
Looking at inventory — a key influencer of price — the supply of homes at the end of December tumbled 10.8 percent to 1.65 million units for sale. This represented a 3.9-month supply of homes at December’s sales pace and was the lowest inventory since NAR started monitoring home supply in 1999. Compared to last year, December’s inventory was 6.3 percent lower than December 2015’s 1.76 million units.
New Home Sales
Turning to new real estate, sales of new homes hit their lowest point in 10 months. Sales of new single-family homes in December fell to 536,000, which was 10.4 percent below November’s rate of 598,000 the Census Bureau and the Department of Housing and Urban Development jointly reported last week.
Housing market watchers attributed the drop not so much to any recent mortgage rate increases, since loan applications were actually up for the month, but rather chalked up the decline to cold weather or seasonal volatility.
Compared annually, December’s sales were just 0.4 percent below December 2015’s sales of 538,000. For the year, 563,000 new homes were sold during 2016, which was a substantial 12.2 percent higher than December’s 2015 sales of 501,000.
Looking at price and supply, the median sales price of a new home sold in December was $322,500, and the average sales price was $384,000. There were 259,000 new homes for sale at the end of December, which represented a 5.8-month supply at the month’s sales rate.
Initial Jobless Claims
Layoffs experienced an unexpected spike when first-time claims for unemployment benefits filed during the week ending January 21 surged to 259,000, a 22,000-claim expansion from the preceding week’s total of 237,000, the Employment and Training Administration reported last week.
The market had expected claims to only hit 246,000. Despite the unexpected jump, initial claims were well below the 300,000-claim mark that economists consider indicative of a growing job market.
The four-week moving average — considered a more stable and reliable measure of layoff activity — skirted down to 245,500, a decline of 2,000 claims from the prior week’s average of 247,500. This is the lowest average since November 3, 1973’s 244,000. Many economists concluded the relatively stable average spoke to a larger trend than the wide swings in the weekly figure.
“Claims have been volatile in recent weeks, but through the volatility, they continue to show no sign of an uptrend,” High Frequency Economics Chief U.S. Economist Jim O’Sullivan told the Wall Street Journal.
This week, we can expect a light calendar of economic reports, due to the holidays:
Monday — Personal incomes and spending for December from the Bureau of Economic Analysis.
Tuesday — Consumer confidence for January from The Conference Board.
Wednesday — Construction spending for December from the Census Bureau; car and truck sales for Wednesday from the auto manufacturers.
Thursday — Initial jobless claims for last week from the Employment and Training Administration; Fourth Quarter productivity from the Bureau of Labor Statistics.
Friday — December factory orders from the Census Bureau; January unemployment rate, payrolls, average workweek and hourly earnings from the Bureau of Labor Statistics.
Written by Summit Mortgage Corporation located in Lakewood, Colorado.