US existing home sales fell by 3.1 percent in 2014
The National Association of Realtors posted a report on January 23 showing that existing home sales rose by 2.4 percent to an annual rate of 5.04 million units last month.
The number of existing home sales in December was slightly below expectations of an annual rate of 5.06 million units.
Home resales rebounded in December, however, low participation by first-time buyers in the housing market suggests that the recovery is going to be slow, but steady.
“The still-tight mortgage credit conditions and more challenging first-time homebuyer affordability that were revealed by the failure of home sales to continue recovering last year remain serious concerns as we head into 2015,” said Ted Wieseman, an economist at JPMorgan in New York.
Last month 29 percent of purchases were made by first-time buyers, a level that is just too low to give the housing market a real boost.
In 2014 existing home sales dropped 3.1 percent, which is the first annual drop since 2010. Since the second half of 2013, when a run-up in mortgage rates occurred, the housing market lost a lot of its momentum.
It would take 4.4 months to clear all available houses from the market at December’s sales rate, a drop from 5.1 months in November.
But, with mortgage rates declining, banks starting to lend more, and the US economy recovering strongly, there is increasing optimism that sales will strengthen again in 2015.
Rebound in construction of new homes
Even though existing home sales disappointed economists in December it should be noted that there was a significant rebound in the construction of new homes, marking 2014 as the most active year in new home construction since the housing boom nine years ago.
The US Commerce Department revealed that starts on single-family homes and apartments increased by 4.4 percent to a rate of 1.043 million in December.