Ahead of the Bell: US home sales
WASHINGTON (AP) — The National Association of Realtors reports on January sales of existing homes Tuesday at 10 a.m. Eastern.
SALES SLIP: Economists forecast that sales slipped 2 percent to a seasonally adjusted annual rate of 5.35 million, according to a survey by data firm FactSet. That would be a sizeable pullback from December, when sales surged 14.7 percent to a rate of 5.46 million. The outsized gains in December largely reflected delays in closing sales due to new regulations.
STEADY DEMAND: Real estate enters 2016 at a crossroads: Job growth and low mortgage rates have fueled demand for houses, but fewer properties are coming onto the market. This mismatch between buyer interest and supply has fueled higher prices and limited sales growth. The Realtors predict that overall sales levels will nearly flatline in 2016, after a 6.5 percent gain in 2015. But median sales prices are forecast to rise 4 percent, much faster than wages.
Driving those price increases are an absence of choices for buyers. The number of listings on the market in December fell 3.8 percent from a year ago. Many homeowners are reluctant to sell, as they’re enjoying savings from low mortgage rates and lack enough equity to comfortably upgrade to another house.
The consequence is that would-be buyers face more competition when bidding on homes_and rising prices.
“So far sales have been bulletproof to price increases, but this is unsustainable in a slowly growing economy unless inventory improves,” said Nela Richardson, chief economist at the real estate brokerage Redfin.
The affordability pressures are showing up in mortgage down payments. As a percentage of the purchase price, down payment levels fell slightly in the closing months of 2015, according to LendingTree, an online lender. But down payments increased in absolute terms to an average of $51,721 in the final three months of the year from $48,924 in the prior quarter.
Hiring has buttressed sales. Employers have added 2.67 million jobs in the past year, as the unemployment rate has fallen to 4.9 percent, from 5.7 percent. Pay growth has been less robust, although it has shown recent signs of accelerating with a 2.5 percent increase from a year ago to an average of $25.39 an hour.
Sales have also been bolstered by mortgage rates near historic lows.
Mortgage buyer Freddie Mac says the average rate on a 30-year, fixed-rate mortgage was 3.65 percent last week, well below the historic average of roughly 6 percent.