Existing Home Sales Pulled Down By Lack Of Supply

Lack of supply pulled down existing home sales in December and may very well pull down sales in January as well. Existing home sales fell 3.6 percent in December to an annualized rate of 5.570 million which is near the low end of Econoday's consensus. But November, despite a small downward revision to a 5.780 million rate, remains by far the best month of the expansion, with the 5.700 million rate in March last year the next strongest.

Supply in December's market fell a very steep 11.4 percent in the month to 1.480 million homes. On a sales basis, supply fell from 3.5 months in November to 3.2 months which is a record low in 19 years of available data. Lack of choice is an increasing problem for the resale market.

Prices softened slightly which won't be drawing new homes onto the market. The median slipped 0.2 percent in the month to $246,800 for a year-on-year increase of 5.8 percent.

This year-on-year price rate is well above the 1.1 percent gain in overall sales which points perhaps to future price concessions and even less supply. On the year, supply is down a very sizable 10.3 percent.

The split between single-family and condo sales shows weakness for the latter, with sales down 11.6 percent on the month to a 610,000 annualized rate. Single-family sales fell a monthly 2.6 percent to 4.960 million.

Housing data are usually volatile which should take the surprise out of December's weakness. Still, resales remain solid though the lack of supply is a serious obstacle for future sales.

Recent History Of This Indicator:
Existing home sales had been lagging sharp acceleration in new home sales until the November report when sales jumped 5.6 percent to a 5.810 million annualized rate. November's rate was by far the strongest of the expansion with 5.700 million in March last year the next closest. But the sales surge drove down supply to only 3.4 months which means a lack of selection was likely to have slowed December sales. Still, a very solid 5.750 million rate is Econoday's consensus for December.