Strong home sales in the fourth quarter continued to put upward pressure on home prices while stressing already-tight inventory, according to the National Association of Realtors, which noted that sales prices in more than half of markets tracked since 2005 bested previous peaks during the period.
The cost of a median existing single-family home rose in nine out of 10 markets (89%) during the quarter while the remainder (11%) saw prices drop from a year ago. For 2016, an average of 87% of markets saw prices increase, up from an average of 86% in 2015.
- California continued to hold many of the most expensive metros during the quarter, while the least-expensive metros were primarily located in the Midwest. Healthy supply in the Northeast is causing price growth there to taper.
Inventory is hitting record lows as demand for housing picks up. The market recorded a 3.9-month supply of available existing homes during the fourth quarter compared to 4.6 months a year earlier, according to the NAR. The quarter closed with 1.65 million existing homes for sale, down 6.3% from a year ago.
That jives with recent data from real estate website Zillow, which put the number of available homes down 4.6% year-over-year in December.
While new construction is expected to help make up for the limited supply of existing homes, builders cite a host of challenges in getting new units in the ground.
Single-family starts fell 4% from November to December to an annualized rate of 828,000 but were 3.9% ahead of December 2015 levels. Permits for the category, meanwhile, were up 4.7% month-over-month and 10.7% for the year.
Still, builders are largely hopeful that they’ll be able to generate a return on growing demand. The National Association of Home Builder’s/Wells Fargo Housing Market Index fell two points in January to a mark of 67. While that’s well above the breakeven threshold of 50, the HMI's sub-indexes for current sales, future sales and buyer traffic also dipped during the period, indicating a slight ebbing of homebuilder confidence in business conditions for the months ahead.
Reasons for the modest decrease in optimism include uncertainty around the Trump administration’s plans for reducing regulations and reforming mortgage finance, among its other campaign pledges. Additionally, recent mortgage rate increases, albeit from historical lows, have been blamed for keeping newer, younger buyers out of the market.
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