Home sales activity ticked up in the final month of 2020 and annual sales activity reached its highest levels since 2006.
Existing home sales increased 0.7% to 6.76 million in December from a month earlier and up 22.2% from the same time a year ago, according to the National Association of Realtors (NAR). The results beat analysts’ estimates compiled by Bloomberg of 6.56 million.
“Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic,” said Lawrence Yun, NAR’s chief economist, in a press statement. “What’s even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market.”
The results were surprising as pending home sales, which lead to actual sales, dipped in October and November, and most analysts expected to see a slight dip in actual sales as a result.
Total inventory at the end of December was 1.07 million units, down 16.4% from a month earlier and down 23% from a year ago, according to the NAR. Unsold inventory is now at an all-time low of 1.9 months’ supply at the current sales pace, down from 2.3 months in November.
“It's surprising that home sales remained this strong in December, considering that buyers have few homes to choose from. It's hard to emphasize how bonkers a 1.9-month supply of homes for sale is. That's a record low, and there's no doubt that even more people would be buying homes if more owners listed their properties for sale,” said Holden Lewis, home and mortgage xpert, NerdWallet, in a press statement.
The upbeat result follows rosy data released Thursday. Housing starts and building permits also ended the year at the fastest pace in 14 years. U.S. home construction jumped 5.8% in December to 1.67 million units, according to the Commerce Department.
The housing market has been a bright spot in the overall economy during the COVID-19 pandemic. Record low mortgage interest rates and pent-up demand from COVID-19 lockdowns have put upward pressure on home prices, which has been rising at rates not seen since March 2014.
According to the NAR, median existing-home price in December was $309,800, up 12.9% from December 2019, as prices increased in every region. December’s national price increase marks 106 straight months of year-over-year gains. And it’s the highest level ever for a December, according to Yun.
“More acute affordability challenges will emerge if inventory stays this tight and home-price growth continues to accelerate,” said Joel Kan’s, assistant vice president of economic and industry forecasting at the Mortgage Bankers Association. “This in turn would be especially challenging for first-time homebuyers, who make up a third of all home sales.”
Amanda Fung is an editor at Yahoo Finance.