* Seasonally Adjusted Annual Rate. Source: National Association of Realtors
WASHINGTON, DC – Existing-home sales reached record levels last year, clocking 5.64 million – the highest since before the 2008 housing crash, according to the National Association of Realtors. The number is a key indicator for demand for wood products used for remodeling and some new construction, such as flooring, millwork, doors, windows, and cabinetry.
December continued at an even more torrid pace, with all regions of the U.S. recording double-digit year-over-year growth, according to Lawrence Yun (below), NAR’s chief economist.
“As home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic,” Yun said. “What’s even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market.” In December, the sales pace rose to 6.76 million on a seasonally adjusted basis, the number that would have sold if every month were as busy as December. The 5.64 million figure is the actual number of homes sold during all 12 months of 2020.
Despite dampening factors including a rise in lending rates and a shortage of homes to buy, 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.”
Unknown is how pandemic-related mortgage relief programs established last March will affect the market longer term. Kevin Palmer, Senior VP at Federal lending agency Freddie Mac says 96% of homeowners who were having trouble have enrolled in such programs. The Biden Administration is already moving to extend protection against foreclosure and eviction even into 2022.
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.
Total housing inventory at the end of December totaled 1.07 million units, down 23% from one year ago. Unsold inventory sits at an all-time low since NAR began tracking it in 1982, with just a 1.9-month supply at the current sales pace. NAR says properties typically remained on the market for 21 days in December, and that first-time buyers were responsible for 31% of sales in December.
“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.”
The NAR existing-home sales figures differ from the U.S. Census Bureau’s series on new single-family home sales, which focus on new construction, and are based on contracts or the acceptance of a deposit. (In November 2020 the Census Bureau reported 841,000 new home sales.)
Yun says NAR’s existing-home sales data account for more than 90% of total home sales, and are based on a large data sample, about 40% of multiple listing service data each month.