Real Estate Blog

U.S. Existing Home Sales Bounce Back Strongly in December

January 23rd, 2011 10:06 AM by Sherry Lee

TD Economics

January 20, 2011

Data Release: U.S. Existing Home Sales Bounce Back Strongly in December

Existing home sales increased by 12.3% in December to a seven month high of 5.28 million, surpassing market expectations for a 4.1% gain. The details of the report were strong. Condo and co-op sales jumped by 16.4% and single-family sales increased by 11.8% in December.

The median home price edged down by 0.8% to $168,800 in December. On a year-over-year basis, median home prices were also down 1.0%.

Foreclosures and short-sales accounted for 36% of total sales in December, compared to 33% in November.

Regionally, home sales were up in all four census regions, with the West recording the largest increase (16.7%), followed by Northeast (13.0%).

The supply of homes available for sale declined by 4.2% to 3.56 million. At the current sales pace, it would take 8.1 months to sell these houses, compared with 9.5 months in November.

Key Implications

December’s strong increase in existing home sales is encouraging, signaling that organic demand (unrelated to tax stimulus) is gaining traction. Record low borrowing costs, coupled with the less costly houses, and rising income and employment should continue to strengthen the demand for homes.

While mortgage delinquency rates have shown improvement as fewer loans enter delinquency and more loans are moved through the pipeline to foreclosure, the sheer stock of potential distressed sales will continue to pull down home prices and limit new housing construction over the next year.

The backlog of foreclosures and uncertainty surrounding home prices are the main constraints to a more normal functioning of credit markets. Fortunately, outside the mortgage market, credit availability, credit quality and credit growth are improving. Further improvement in home sales and an acceleration of credit growth could signal a move to a much stronger pace of economic growth. For more on recent credit trends and their implications for the U.S. recovery please see our recent report “Outside of Mortgages, U.S. Credit Showing Broad Improvement”.

Christos Shiamptanis, Economist

DISCLAIMER - This report is provided by TD Economics for customers of TD Bank Group. It is for information purposes only and may not be appropriate for other purposes. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. The report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

Posted in:General
Posted by Sherry Lee on January 23rd, 2011 10:06 AM

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