Home construction is feeling the implications of rising mortgage rates, according to the National Association of Home Builders (NAHB), after reports saw nearly a 6.5% drop in existing-home sales in December 2018. NAHB analyzed data from the National Association of Realtors (NAR) published on Jan. 22, which included single-family homes, townhomes, condominiums and co-ops.
NAHB Economist Fan-Yu Kuo said in her report "growing home prices and tight inventory" were also to blame. Existing-home sales climbed in October and November 2018, but decreased by 10.3% in December 2018 over the prior year.
"Though the sales bounced back in October after six consecutive months of declines due to an increase in inventory and slower home price growth, it still ended the year on a low note," Kuo said. "The total sales remained down at both national and regional level compared to a year ago."
NAR data found a median sales price of $253,600 in December, a nearly 3% increase over December 2017. The price of condos/co-ops was $13,000 less but was still up 2.3% from the prior year.
In a separate report, Wells Fargo Senior Economist Mark Vitner and Economist Charlie Dougherty said sales were down across the country, particularly in the Midwest, where sales declined 11.2%. However, there was some hope in the December housing report, as the economists said the longer homes are on the market, the more "negotiating power" buyers have in the process.
"The average home stayed on the market for 46 days in December, up from 42 days in November and 40 days a year ago," the economists reported. "… Given the rapid appreciation of prices seen earlier in the cycle, some moderation should benefit homebuyers as mortgage rates will likely continue to gradually trend higher in coming months."
—Andrew Michaels, editorial associate