Existing-home sales rose in December, with home sales in 2020 reaching their highest level since 2006, according to the National Association of Realtors. Activity in the major regions was mixed on a month-over-month basis, but each of the four areas recorded double-digit year-over-year growth in December.
Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 0.7% from November to a seasonally-adjusted annual rate of 6.76 million in December. Sales in total rose year-over-year, up 22.2% from a year ago (5.53 million in December 2019).
“Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic,” said Lawrence Yun, NAR’s chief economist. “What’s even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market.”
Yun predicts a continuation of the strong activity that’s currently taking place in the housing market and in the overall economy.
“Although mortgage rates are projected to increase, they will continue to hover near record lows at around 3%,” Yun said. “Moreover, expect economic conditions to improve with additional stimulus forthcoming and vaccine distribution already underway.”
The median existing-home price for all housing types in December was $309,800, up 12.9% from December 2019 ($274,500), as prices increased in every region. December’s national price increase marks 106 straight months of year-over-year gains.
Total housing inventory at the end of December totaled 1.07 million units, down 16.4% from November and down 23% from one year ago (1.39 million). Unsold inventory sits at an all-time low 1.9-month supply at the current sales pace, down from 2.3 months in November and down from the 3.0-month figure recorded in December 2019. NAR first began tracking the single-family home supply in 1982.
Properties typically remained on the market for 21 days in December, seasonally even with November and down from 41 days in December 2019. Seventy percent of the homes sold in December 2020 were on the market for less than a month.
“To their credit, homebuilders and construction companies have increased efforts to build, with housing starts hitting an annual rate of near 1.7 million in December, with more focus on single-family homes,” Yun said. “However, it will take vigorous new home construction in 2021 and in 2022 to adequately furnish the market to properly meet the demand.”
First-time buyers were responsible for 31% of sales in December, unchanged from the same time in 2019, but down from 32% in November 2020. NAR’s 2020 Profile of Home Buyers and Sellers – released in late 2020– revealed that the annual share of first-time buyers was 31%.
Individual investors or second-home buyers, who account for many cash sales, purchased 14% of homes in December, identical to the share recorded in November 2020 and a small decline from 17% in December 2019. All-cash sales accounted for 19% of transactions in December, down from 20% in both November and December 2019.
Distressed sales – foreclosures and short sales – represented less than 1% of sales in December, equal to November’s percentage but down from 2% in December 2019.
“NAR will work with the incoming Biden administration in pursuit of policies promoting housing affordability and accessibility,” said NAR President Charlie Oppler, a Realtor® from Franklin Lakes, N.J., and the CEO of Prominent Properties Sotheby’s International Realty. “We were pleased with the homebuyer tax credit President Biden proposed as a candidate and we look forward to continuing our work with Congress and the White House. We will aim to find common ground, especially related to ways of boosting home supply and working toward solutions that will protect and support homeownership and America’s broader real estate industry.”
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 2.68% in December, down from 2.77% in November. The average commitment rate across all of 2020 was 3.11%.