US existing home sales drop to lowest in three years in December

Sales of US existing homes fell to their lowest level in three years in December, according to data from the National Association of Realtors.

Sales fell 6.4% from November to a seasonally-adjusted rate of 4.99m, missing expectations for a smaller drop to 5.25m and hitting their lowest level since November 2015. On the year, sales were down 10.3%.

Meanwhile, the median price of an existing home was $253,600, up 2.9% from December 2017, while total housing inventory fell to 1.55m from 1.74m existing homes available for sale in November. However, this was up from 1.46m a year ago.

Sales in the Northeast were down 6.8% to an annual rate of 690,000, while existing home sales in the Midwest fell 11.2% from the previous month to 1.19m. Sales in the South dropped 5.4% to 2.09m and in the West, they fell 1.9% to an annual rate of 1.02m.

Lawrence Yun, NAR chief economist, said: "The housing market is obviously very sensitive to mortgage rates. Softer sales in December reflected consumer search processes and contract signing activity in previous months when mortgage rates were higher than today. Now, with mortgage rates lower, some revival in home sales is expected going into spring."

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "The consensus forecast was baffling; the pending home sales index pointed clearly to a big drop in sales, and it was dead right.

"Sales are now running far below the 5.1m or so implied by the mortgage applications numbers, probably as a result of Hurricanes Florence and Michael, the California wildfires, and the much colder-than-usual weather in November, which depressed pending sales and then hit December existing home sales.

"Looking forward, the scope for a hefty rebound is very clear, and we expect the first quarter’s sales numbers to surprise to the upside. Slowly rising inventory, though, will maintain the downward pressure on the rate of growth of price increases."