By Lucia Mutikani
WASHINGTON (Reuters) – U.S. existing home sales rose to a 10-month high in December, but further gains are expected to be limited by high mortgage rates and housing prices, which are keeping many would-be buyers on the sidelines .
Home sales rose 2.2% last month for a seasonally adjusted annual rate of 4.24 million units, the highest level since February, the National Association of Realtors said Friday.
Economists polled by Reuters had predicted home networks would grow at a rate of 4.19 million units. Sales jumped 9.3% on an annual basis, the biggest increase since June 2021.
A total of 4.06 million previously owned homes were sold last year, the lowest number since 1995.
“Home sales in the final months of the year showed a solid recovery despite high mortgage rates,” said Lawrence Yun, NAR chief economist. “Employment and wage gains, along with an increase in inventory, are having a positive impact on the market.”
An investigation by the mortgage financing agency Fannie Mae (OTC:) Wednesday predicted weak first-half existing home sales, noting that “new homes are now priced competitively with existing homes and are much more available.” It forecasts that the popular 30-year fixed-rate mortgage averaged 6.7% in the first quarter and declined to 6.6% in the second quarter.
Mortgage rates rose late last year in tandem with U.S. Treasury yields, which jumped amid economic resilience, particularly in the job market, and investors worried that the government’s plans President Donald Trump calls for tax cuts, across-the-board tariffs and mass deportations to quell inflation.
The Federal Reserve reduced its planned interest rate cuts for this year to just two from the four it estimated in September, when it launched its policy easing cycle. The average rate on a 30-year fixed-rate mortgage is just below 7%.
Housing inventory fell 13.5% to 1.15 million units last month. Supply increased by 16.2% compared to a year ago. The existing median home price increased 6.0% from the previous year to $404,400 in December and reached a record high of $407,500 in 2024.
At the pace of December sales, it would take 3.3 months to exhaust the current inventory of existing homes, up from 3.1 months a year ago. A supply of four to seven months is considered a healthy balance between supply and demand.
Properties generally stayed on the market for 35 days in December, compared to 29 days a year ago. First-time buyers represented 31% of sales compared to 29% a year ago. They accounted for a record low of 24% in 2024. Economists and real estate agents say a 40% share is needed for a robust housing market.
All-case sales accounted for 28% of transactions last month, up from 29% a year ago. Distressed sales, including foreclosures, accounted for just 2% of transactions, unchanged from last year.
