Home buying cooled in December, but is still stronger than it was a year ago.
A monthly index from the National Association of Realtors measuring signed contracts to buy existing homes fell 3.7 percent from a downwardly revised November reading, but it is 6.1 percent above December of 2013. This, after closed sales in December (contracts signed one to two months earlier) rose 2.4 percent from November.
"Total inventory fell in December for the first time in 16 months, resulting in fewer choices for buyers and a modest uptick in price growth in markets throughout the country," said Lawrence Yun, chief economist for the association. "With interest rates at lows not seen since early 2013, the strength in existing sales in upcoming months will largely depend on the willingness of current homeowners to realize their equity gains from the past couple years and trade up."
Conversely, a reading by the U.S. Census of signed contracts to buy newly built homes rose over 11 percent in December, and both Realtors and home builders have been noting increased buyer traffic in the past few months. One of the nation's largest home builders, PulteGroup, reported better-than-expected fourth quarter 2014 earnings Thursday.
"We are optimistic heading into 2015 as buyer sentiment began improving in late November, supporting stronger traffic and signup levels throughout December and into January," said Richard J. Dugas, Jr., President and CEO of PulteGroup.
Dugas pointed to an improving economy, rising employment, lower mortgage rates and lower energy costs for the increased interest in home buying.
The Realtors' index dropped most in the Northeast, down 7.5 percent month-to-month. It was down 2.8 percent in the Midwest, and down 2.6 percent in the South. In the West, which has been seeing stronger sales lately, the index fell 4.6 percent. The Realtors are predicting 2015 total sales to increase by 6.6 percent from 2014 to 5.26 million. Total sales in 2014 were lower than 2013.