Home Sales End 2011 On High Note

By:: Peter King | January 20, 2012

Existing home sales ended the year on a positive note, posting a 5 percent seasonally adjusted gain in December over the previous month’s tally.

The National Association of Realtors (NAR) reported today that December existing home sales were at an annual pace of 4.61 million units, up from 4.39 million in November. For the year, existing home sales totaled 4.26 million in 2011, up 1.7 percent from 4.19 million the year before.

“The pattern of home sales in recent months demonstrates a market in recovery,” said Lawrence Yun, NAR chief economist. “Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market.”

The inventory of homes for sale continued to shrink in December, dropping to an estimated 2.38 million, representing a 6.2 month supply, down from a 7.2 month supply in November. A six-month supply is traditionally considered the level needed to support stable home prices; a greater supply tends to push prices down, while a lesser supply tends to push them up.

“The inventory supply suggests many markets will see prices stabilize or grow moderately in the near future,” Yun said.

The inventory of home listed for sale is at its lowest level in nearly six years, since hitting 230 million in March 2005. However, a large “shadow inventory” of foreclosed properties not yet on the market and delinquent homes not yet foreclosed continue to exert downward pressure on home prices.

Just over one-fifth of all home sales were purchased by investors in December, many of them buying foreclosed properties. On average, foreclosures were selling at a 22 percent discount compared to nondistressed homes, according to NAR figures.

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