Limited Supply Drove Down Existing-Home Sales in December 2017

The ongoing housing inventory crisis is driving up prices, and slowing down sales. Existing-home sales for all of 2017 were just 1.1 percent higher than in 2016. However, 2017 was the best year for existing-home sales since 2006.

According to MarketWatch, 'lopsided' supply and demand is a driving force in the housing market. Inventory of existing homes for sale fell 11.4 percent in December, marking the 31st month in a row in which supply was lower compared with a year ago. If the current pace of sales continues, it would take 3.2 months to sell all available inventory, the lowest since National Association of Realtors began tracking in 1999. NAR Chief Economist Lawrence Yun said, “The lack of supply over the past year has been eye-opening."

Despite the monthly noise, sales in the final quarter of 2017 showed momentum, said Michael Englund, chief economist for Action Economics. “We expect a 5 percent contraction rate for existing home sales in Q1 with a hit from cold weather.” The NAR and others have warned that the tax changes recently signed into law will stifle demand in the housing market. But some analysts believe that a little less demand might be healthy, in the absence of a big jump in supply.

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