The recently concluded year saw a formidable recovery in housing, with the final 2012 metric on sales of existing homes continuing the solid trend. Data on this series was provided by the National Association of Realtors (NAR), an industry trade group.
To be sure, there was a modest retreat on the sales front on a sequential-month basis, with December sales coming in at an estimated annualized rate of 4.94 million homes. That was down from the revised November total of 4.99 million homes sold. However, total sales in 2012 were at a five-year high, and the year-to-year increase for the final month of last year was 12.8%. The December 2011 sales rate was 4.38 million homes.
Taken over the full year, the preliminary annual total for existing home sales last year was 4.65 million units sold. That was up more than 9% from the 2011 total of 4.26 million homes. This represented the highest volume since 2007, when the sales total came in at 5.03 million units, and was the largest 12-month gain since 2004.
According to Lawrence Yun, the Chief Economist of the NAR, “pent-up demand is sustaining the market.” This improved buying is being supported, as well, by record low mortgage rates, better pricing, and increased affordability. This is a tough combination to beat, in our opinion. Mr. Yun went on to predict increases in both the level of sales and the average price of a home in 2013. Our sense is that the swelling price of a residence, whether new or resale, will underpin demand, as potential buyers will not feel that they are merely throwing good money after bad when buying a home.
Also helping the likely boost in demand this year are low housing inventories. The total of homes for sale, in fact, are 21.6% below comparable figures a year ago. Meantime, housing inventories at the end of December had fallen by 8.5% to 1.82 million existing homes. The supply of 4.8 months is considered very low, and the lowest level since May of 2005, when inventories were at just 4.3 months’ supply. That time was just about when the housing market was gaining some final momentum, before starting to fall off of a cliff in 2007 and 2008.
All in all, this was a decent report, notwithstanding the slight sequential-month slippage to close out the old year. Housing is back and with the nation's economy poised to grow by at least 2% this year, in our opinion, this enviable comeback should continue in the months and perhaps years ahead.
At the time of this report's writing, the author did not have positions in any of the companies mentioned.