U.S. existing home sales fall sequentially in December

U.S. existing home sales dropped sequentially in December following a sharp rise in the prior month. Sales fell 3.6 percent month-on-month to 5.57 million units. The headline figure came below expectations of a more modest reversal of around 2 percent.

The fall was widespread among the segments. The larger single-family segment saw a decline of 2.6 percent, while the smaller condo/co-op segment completely reversed last month’s rise, dropping 11.6 percent sequentially to 610k.

Region wise, activity dropped broad based, with the Northeast, South and Midwest recorded drops, reversing last month’s outsized gains, while sales in the West continued to fall for the second straight month.

The inventory of homes available for sale dropped 11.4 percent sequentially and continued to be low by historical standards at a seasonally unadjusted 1.48 million, a drop of 10.3 percent year-on-year.

Even with the December fall, activity rose 4.3 percent recouping the ground lost in the second and third quarter where sales retreated by 1 percent and 3.2 percent respectively.

Positive consumer sentiment, along with recent improvements mortgage applications, augurs well for near-term momentum. In the meantime, strong housing demand, underpinned by a tightening labor market that is likely to boost wages higher, imply that the recent trend should extend further out, noted TD Economics in a research report.

Still, supply constraints and increasing mortgage rates, would work in the opposite direction, restricting the rate of gains to a certain degree.

“Low inventory levels remain the most visible near-to-medium term constraint. And improvements on this front – related to rising home values which should encourage existing homeowners to list their properties and boost homebuilding activity – are expected to be of a gradual nature”, added TD Economics.

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