Home resales in the United States fell 5.7% in December to the lowest level since March 2004 as the market cooled on the back of slowing Midwest economies and the loss of investors, a trade group said Wednesday.
But for the year, 7.1 million existing homes were sold, making 2005 the fifth record year in a row, the National Assn. of Realtors said.
“So, 2005, when we look back, was the best year in housing in recent memory, probably of all time,” said David Lereah, the group’s chief economist.
December’s sales rate of 6.6 million units compared with an upwardly revised 7.0-million-unit pace in November. That includes both single-family homes and condos.
Analysts had expected overall sales to decline to a 6.9-million-unit annual rate in December from an originally reported 7.0-million-unit rate the previous month.
December’s drop in existing-home sales signaled further cooling in the U.S. housing market after five years of gains that shattered construction and sales records and sent prices up more than 55% nationwide.
The decline in total sales for the month was driven by a 6.8% drop in single-family home sales. Condo sales rose 1.6%.
But some of the slowing was happening in markets that never experienced a housing boom, such as Detroit and Columbus, Ohio, and other markets in the Midwest, Lereah said. He said job losses and slowing local economies were hurting housing there.
“There are job problems in some of those local markets, and we’re starting to see it in the housing numbers,” he said.
While the number of homes available for sale nationwide fell 4.4% to a 5.1-month supply at the current sales pace, inventories in non-boom markets increased, Lereah said.
What’s more, inventories in some of the hottest markets, such as Las Vegas and some areas of California, fell last month, signaling that demand continued to outstrip supply there.
Lereah said investors and speculators who had flocked to the housing market and boosted demand and prices in recent years had begun to exit.
“I think that’s good for the housing markets, but right now it is exacerbating the slowing that we’re starting to see,” he said.
Price gains have already begun to ease, the Realtors group said, noting that price appreciation hit 16.6% in October and then slowed to 13% in November and 10.5% in December.
The national median sales price in December was $211,000, the group said.
For 2005, prices nationwide rose 12.7%, but as the market cools and mortgage rates rise, this should slow to about 6% in 2006, Lereah said.
Regionally, sales in December dropped 11.4% in the West, 7.2% in the South and 2.6% in the Midwest. Sales were flat in the Northeast, according to the Realtors group.
In a separate report, U.S. mortgage applications climbed for the third straight week in January, fueled by a decline in long-term rates to 3 1/2 -month lows, an industry trade group said Wednesday.
The Mortgage Bankers Assn. said its seasonally adjusted index of mortgage application activity for the week ended Friday rose 7.7%, boosted by demand for home loans and refinancing.