A lack of homes for sale is keeping potential buyers at bay. Signed contracts to buy existing homes rose just 0.1 percent in December from a downwardly revised November reading, according to the National Association of Realtors (NAR).
Taking the revision into account, sales were flat. Only the Northeast, likely due to warmer-than-average weather, saw gains. These so-called 'pending' home sales are now 4.2 percent higher than December of 2014. Pending sales are a forward indicator of closed sales one to two months later.
"Overall, while sustained job creation is spurring more activity compared to a year ago, the ability to find available homes in affordable price ranges is difficult for buyers in many job creating areas. With homebuilding still grossly inadequate, steady price appreciation and tight supply conditions aren't going away any time soon," said Lawrence Yun, chief economist for the NAR.
Demand is growing, but the supply of homes for sale is now at a ten-year low. Supplies usually increase during the slower winter months, but that was not the case. Inventory fell over 3 percent in December, according to the NAR. Low supply is driving prices higher at a pace that Realtors are calling unhealthy and unsustainable.
Meanwhile the new home market is benefiting from the tight and pricey existing home market. Sales of newly built homes jumped nearly 11 percent in December month-to-month, according to the U.S. Census. Home builders PulteGroup and DR Horton, reported better-than expected earnings for their most recent quarters.
"While the heightened global economic concerns have created greater market volatility, the positive trend in jobs, demographics and household formations, along with low interest rates and limited housing inventory, support expectations that housing demand continues to move higher at a measured pace for a number of years," said Richard J. Dugas, Jr., CEO of PulteGroup in a the company's earnings release Thursday.
Supplies of newly built homes, however, are also falling, and newly built starter homes, those priced below $200,000, represent just 19 percent of listings. That is down from 23 percent in 2014.
Regionally, pending home sales saw gains only in the Northeast, up 6.1 percent for the month and up 15.3 percent from a year ago. In the Midwest, sales decreased 1.1 percent for the month and are 3.6 percent above December 2014. Pending home sales in the South declined 0.5 percent and are 1.0 percent higher than last December. Sales fell 2.1 percent in the West monthly and are 3.4 percent higher than one year ago.