December 2015 Existing Home Sales Headlines Say Sales Jumped

The headlines for existing home sales say “December’s robust bounce back caps off the best year of existing sales (5.26 million) since 2006 (6.48 million)“. Our analysis of the unadjusted data shows that home sales did improve, but considerably less than the headlines – and consider even with this improvement that the rolling averages declined.

Econintersect Analysis:

Unadjusted sales rate of growth accelerated 6.1 % month-over-month, up 6.1 % (no typo) year-over-year – sales growth rate trend declined using the 3 month moving average.

Unadjusted price rate of growth accelerated 0.8 % month-over-month, up 4.7 % year-over-year – price growth rate trend is modestly improved using the 3 month moving average.

The homes for sale inventory declined again this month, remains historically low for Decembers, and is down 3.8 % from inventory levels one year ago).

NAR reported:

Sales up 14.7 % month-over-month, up 7.7 % year-over-year.

Prices up 7.6 % year-over-year

The market expected annualized sales volumes of 5.000 to 5.450 million (consensus 5.20 million) vs the 5.46 million reported.

Unadjusted Year-over-Year Change in Existing Home Sales Volumes (blue line) – 3 Month Rolling Average (red line)

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The graph below presents unadjusted home sales volumes.

Unadjusted Monthly Home Sales Volumes

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Here are the headline words from the NAR analysts:

Lawrence Yun, NAR chief economist, says December’s robust bounce back caps off the best year of existing sales (5.26 million) since 2006 (6.48 million). “While the carryover of November’s delayed transactions into December contributed greatly to the sharp increase, the overall pace taken together indicates sales these last two months maintained the healthy level of activity seen in most of 2015. Additionally, the prospect of higher mortgage rates in coming months and warm November and December weather allowed more homes to close before the end of the year.”

“Although some growth is expected, the housing market will struggle in 2016 to replicate last year’s 7 percent increase in sales,” adds Yun. “In addition to insufficient supply levels, the overall pace of sales this year will be constricted by tepid economic expansion, rising mortgage rates and decreasing demand for buying in oil-producing metro areas.”

“First-time buyers were for the most part held back once again in 2015 by rising rents and home prices, competition from vacation and investment buyers and supply shortages,” says Yun. “While these headwinds show little signs of abating, the cumulative effect of strong job growth in recent years and young renters’ overwhelming interest to own a home5 should lead to a modest uptick in first-time buyer activity in 2016.”

“December’s rebound in sales is reason for cautious optimism that the work to prepare for Know Before You Owe is paying off,” says NAR President Tom Salomone. “However, our data is still showing longer closing timeframes, which is a reminder that the near-term challenges we anticipated are still prevalent. NAR advised members to extend the time horizon on their purchase contracts to address this concern, and we’ll continue to work with our industry partners to ensure 2016 is a success for consumers, homeowners and Realtors® alike.”