December Existing Home Sales

Sales of existing homes increased in December over November by 12.3%.  The seasonally adjusted annualized number of homes sold went from 4.7 million in November to 5.28 million in the final month of 2010.  December is the fifth month out of the last six which has shown improvement.  Nevertheless, while the most recent trend has been up, it did not move fast enough to best the December 2009 pace of sales.

Prices helped move sales as the national median existing-home price slipped one percent year-over-year to $168,000.  The composition of homes sold still points to weakness as 36% of the homes sold fell into the “distressed” category (e.g. foreclosure or short sales) versus 33% in November and 32% at the end of 2009.

Mortgage rates are doing their share to help the market as Freddie Mac reported a national average commitment rate for a 30-year, conventional, fixed rate mortgage at 4.71%.  This is less than the 4.93% rate seen in December of 2009.
The combination of rates and prices are having a positive impact on inventories.  The nationwide number of homes for sales now stands at 3.56 million.  If we divide that by the most recent sales pace, we get an inventory that will take 8.1 months to unload.  The housing market is considered to be healthy when it has roughly a six month supply, so after November’s inventory of 9. 5 months, we are headed in the right direction.

It’s no secret that the housing market has proven to be a drag on our economy.  This weakness has continued to influence consumer behavior as Americans feel less wealthy.  The Atlas crew sees housing continuing to be an issue until inventories, both the explicit and implicit, are worked through.  This month’s existing home sales report will be logged under the category of making progress.