2017 ended up being the best year for existing-home sales in 11 years, according to the National Association of Realtors.
Existing-home sales dropped 3.6% month over month on a seasonally adjusted basis in December as inventory shortages were severe. But even with that decline, sales for all of 2017 were up 1.1% over the prior year, hitting a sales pace of 5.51 million – the highest since 2006.
Lawrence Yun, NAR’s chief economist said “The lack of supply over the past year has been eye-opening and is why, even with strong job creation pushing wages higher, home-price gains – at 5.8% nationally in 2017 – doubled the pace of income growth and were even swifter in several markets.”
Inventory, was tighter than ever and hit a new all-time low. Total US inventory at the end of December was 1.48 million existing homes available for sale – an 11.4% drop from the year before. Unsold inventory is at a 3.2-month supply at the current sales pace – the lowest level since NAR began tracking nearly two decades ago.
The median existing-home price in the US last month was $246,800, a 5.8% spike from December 2016. December of 2017 also marked the 70th consecutive month of year-over-year price gains.
“Existing sales concluded the year on a softer note, but they were guided higher these last 12 months by a multi-year streak of exceptional job growth, which ignited buyer demand,” Yun said. “At the same time, market conditions were far from perfect. New listings struggled to keep up with what was sold very quickly, and buying became less affordable in a large swath of the country. These two factors ultimately muted what should have been a stronger sales pace. … Affordability pressures persisted, and the pool of interested buyers at the end of the year significantly outweighed what was available for sale.”
Source: National Association of Realtors
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 3.50 MBS) lost -6 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways for the week.
Overview: Mortgage Backed Securities remained under pressure as long bond strategists continued to shift their hedges towards higher rates in the near term. Overall, the week’s economic data was strong but not by enough to accelerate the sell off.
Taking it to the House: Weekly Mortgage Applications increased by 4.5% led by Refinance Applications up 6.0%. Purchase Applications rose by 1.0%.
The November FHFA Housing Price Index rose by 0.4% on a MOM basis and is up 6.5% on YOY basis.
Existing Home Sales in December felt severe inventory constraints. Inventories fell by 10.3% to their lowest levels ever on record. The annualized sales pace hit 5.57M which was lower than the expectations of 5.70M but that was not due to lack of demand. It was due to lack of inventory. The median home price rose to $246,800.
Gross Domestic Product: We got the first look at the 4th QTR GDP, it will be revised several more times but the initial reading of 2.6% is good steady growth. Odds are that by the time the final revision hits, that number will be closer to 2.9%. Consumer Spending saw a very strong 3.8% increase. Other highlights were a 14.2% burst in spending on durable goods items. Residential Investment jumped 11.6% and non-residential fixed investment rose by 6.8%.
Durable Goods Orders for December were much hotter than expected, coming in at 2.9% vs est of only 0.6%. Plus, November was revised upward from 1.3% to 1.7%. Aircraft and vehicles saw a nice surge in orders.