Shrinking stocks, especially among cheaper homes, were one of the biggest drivers of rising prices. The year ended with the lowest number of homes ever available.
Lawrence Yun, chief economist of NAR, predicts that the strong operations in the housing market will continue until this year.
“Although the interest rate is expected to rise, it will remain hovering near record lows at around 3%,” Yun said. “Expect economic conditions to improve with additional stimulus ahead and the distribution of vaccines already underway.”
But Yun warns that the current market is not what he would describe as a ‘healthy market’, in which house prices rise in line with income growth and buyers have enough time to make informed decisions about a major purchase.
“In that sense, it’s unhealthy,” Yun said. “Buyers make hasty decisions.”
“Homeowners smile because they see price increases,” Yun said. “They can trade until their next home purchase. But the frustration comes from first time buyers.”
This is because there are fewer homes than ever before and more competition for homes for sale.
The stock is at a low point, according to NAR, with 23% fewer homes for sale in December than a year ago. And the number of homes available for sale is lower in all price categories except $ 750,000 and above.
“There will be more acute affordable challenges if stocks remain so tight and house price growth continues to accelerate,” said Joel Kan, deputy president of economic and industrial forecasting. “This, in turn, would be particularly challenging for first-time home buyers, who account for a third of all home sales.”
The strong existing sales of houses in the latter part of the year continued until December, and sales of existing houses – which include single houses, townhouses, flats and co-operatives – increased by 22% from a year earlier to a seasonal season. adjusted annual rate of 6.76 million.
Houses at the top of the market sold at a faster rate than the houses at the bottom of the market. While home sales of $ 100,000 and less fell by 15% in December from the year before, sales rose 76% for homes sold between $ 750,000 and $ 1 million. For homes of $ 1 million and above, the number of sales essentially doubled.
The decline on the lower side is due to the persistently low stock, Yun said.
“If we had more inventory at the lower price points, we would have even greater home sales than reported.”