Coverage: Housing sales drop to three-year low

Existing-home sales ran at a seasonally adjusted annual rate of 4.99 million in December, the National Association of Realtors said Tuesday, the lowest since November 2015. Sales were down 6.4 percent for the month, and 10.3 percent lower than the year-ago rate.

Andrea Riquier of MarketWatch.com had the news:

In December, home showings were 7.2% lower than a year ago, the fifth straight month of yearly declines, according to a report from ShowingTime. The company’s data comes from more than 1.2 million active listings that subscribe to its services. “Buyer traffic continues to subside across all regions of the U.S. compared to the record numbers recorded at the same time last year,” ShowingTime said in a statement. “This is potentially good news for buyers, who are seeing less competition in the market.”

“In the very near term, we think we could see a brief period of stronger housing data,” said economists at Bank of America Merrill Lynch.

“The decline in mortgage rates is very well timed ahead of the spring selling season. We suspect that potential homebuyers who may have been scared from the market during the period of rising rates in the fall could see it as an opportunity to jump back in. Moreover, the labor market is currently very strong with a high number of job openings and upward pressure on wages.”

Laura Kusisto and Sarah Chaney of The Wall Street Journal reported that price increases slowed:

Meanwhile, home-price growth has also slowed significantly, a sign that many owners struggling to sell their homes are starting to cut prices or ask for a more conservative number. The median sale price for an existing home in December grew 2.9% from a year earlier—the smallest increase since March 2012, when the market was still depressed from the housing crash.

That slump could be good news for buyers, many of whom can’t afford higher prices or worry about another housing bubble, and it could inject some positive momentum into the market.

Mortgage rates have also come down in recent weeks, easing concerns that a long era of cheap housing credit was about to end. Rates nearly hit 5% about two months ago, but average rates for a 30-year, fixed-rate mortgage dropped to 4.45% last week, according to Freddie Mac. Purchase mortgage applications grew 9% for the week ending Jan. 11 from a week earlier to the highest level since April 2010, according to a Mortgage Bankers Association index. If rates stay low and stocks rally again, that could also help boost sentiment.

Lucia Mutikani of Reuters reported that the results missed expectations:

Economists polled by Reuters had forecast existing home sales falling 1.0 percent to a rate of 5.25 million units in December. Existing home sales, which make up about 90 percent of U.S. home sales, plunged 10.3 percent from a year ago.

For all of 2018, sales fell 3.1 percent to 5.34 million units, the weakest since 2015.

The housing market has been stymied by higher mortgage rates as well as land and labor shortages, which have led to tight inventory and more expensive homes.

But there are glimmers of hope. The 30-year fixed mortgage rate has dropped to a four-month low, with much of the moderation occurring in the second half of December, and house price inflation is slowing. The median existing house price increased 2.9 percent from a year ago to $253,600 in December. That was the smallest increase since February 2012.