Existing-home sales rise to best pace since early 2018

Sales of previously owned homes jumped in December to the best pace in nearly two years as historically low interest rates continued to lure buyers despite record-low inventory.

Contract closings rose 3.6% from the prior month to a 5.54 million annual rate, according to National Association of Realtors data released Wednesday that exceeded all but one estimate in Bloomberg's survey. The median sales price climbed 7.8% from a year earlier, the most since January 2016, to $274,500 as inventories declined for a seventh-straight month.

Looking across 2019, existing-home sales grew at a 5.34 million pace, the same as 2018.

The unexpectedly robust advance for sales, which marked the strongest pace since February 2018, marked a strong finish for a housing sector that began last year struggling to gain its footing. The residential rebound is poised to support economic growth for a second consecutive quarter and cushion the economy from subdued business investment.

At the current pace, it would take 3 months to sell all the homes on the market, the lowest in more than two decades of data, compared with 3.7 months in November. Realtors see anything below five months of supply as a sign of a tight market.

Recent data underscore positive momentum in the sector heading into the new year. Housing starts jumped to a 13-year high in December as construction of single- and multifamily units surged. Meanwhile, homebuilder sentiment posted the best back-to-back readings since 1999 in December and January as measures of prospective buyers and the sales outlook improved.

"America is facing a dire housing shortage condition," Lawrence Yun, NAR's chief economist, said at a briefing in Washington. "We need to build more."

Three of four major regions saw gains from the prior month, led by a 5.7% rise in the Northeast. The Midwest posted a modest decline.

First-time buyers made up 31% of sales, down slightly from 32% the previous month.

Existing-home sales account for about 90% of U.S. housing and are calculated when a contract closes. New-home sales, which make up the remainder, are counted when contracts are signed and will be released Monday.

Bloomberg News