December 2018 was not a great month for the US housing industry in either existing home sales or new home sales.
Existing home sales dropped -6.4% from November’s sales figures to a seasonally adjusted 4.99M sales in December 2018 and, compared to December 2017’s 5.56M sales, existing home sales dropped -10.3%, according to the National Association of REALTORS® (NAR) latest Existing Home Sales Report.
Realtor.com chief economist Danielle Hale indicated that existing home sales had not fallen below 5M for three years.
December 2018’s sales pace of existing home sales could actually be compared to the sales pace of existing homes in 2000 with two BIG caveats…housing was more affordable in 2000 than it was in 2018 and there were 20M more people working in jobs in 2018 than in 2000.
Other data points worth mentioning in NAR’s December 2018 Existing Home Sales report include…
- The median existing home price was $253,600, +2.9% increase from December 2017, the 82nd straight month of y/y gains.
- Inventory fell to 1.55M homes in December from 1.74M homes in November 2018, an increase from 1.46M in December 2017.
- Unsold inventory represented a 3.7-month supply, down from 3.9 months in November 2018.
- Days on the Market were 46 in December 2018, up from 42 days in November 2018 and up from 40 days in December 2017.
New home sales in December 2018 were no better than existing home sales. New home sales fell an overall -19% compared with December 2017, according to John Burns Real Estate Consulting, a housing research and analytics firm. New home sales in Northern California dropped a startling -40%; in Southern California, new home sales dropped an eye popping -49%; and in the South (usually the larges new home sales market) and Midwest, new home sales dropped a disconcerting -44% compared with December 2017.
John Burns of Burns Real Estate Consulting points to 4.5% interest rates as the culprit for the -19% fall in new home sales in December 2018. “Mortgage rates are a double whammy…(those rates) are keeping entry-level buyers out of the market…and keeping current homeowners who want to move locked it because their current mortgage rates are so much lower than now.”
Just under 25% of new homebuilders surveyed by John Burns Real Estate Consulting indicated they had reduced their prices in December 2018. The overall cancelation rate of new home sales was 18% while move-up buyers and luxury buyers cancelled at a rate of 14% and 11% respectively. .
To cap off the new home sales market in December 2018, Toll Brothers, the nation’s largest luxury home builder, reported that it had a 39% drop in new orders from California.