WASHINGTON (AP) – More Americans purchased homes in December, yet total sales slipped in 2014 as first-time buyers struggled to find houses.
The National Association of Realtors said Friday that sales of existing homes rose 2.4 per cent last month to a seasonally adjusted annual rate of 5.04 million. But over the course of the entire year, sales fell 3.1 per cent to 4.93 million.
Only 29 per cent of sales went to first-time buyers last month, compared to a historic average of 40 per cent. Prospective buyers were priced out of the market due to rising home values and relatively stagnant incomes. Still, affordability has improved in recent months as mortgage rates have plunged, leading to the possibility of stronger sales in 2015.
“Sales will increase throughout 2015 as potential buyers feel more comfortable about the economic outlook and lenders are willing to make loans,” said Stuart Hoffman, chief economist at PNC Financial Services.
Median home prices increased 6 per cent over the past 12 months to $209,500.
There were relatively few listings in December, as the supply of homes on the market dropped to 4.4 months from 5.1 months in November, the Realtors said. The supply was the lowest in two years.
Much of the gains in sales came from the West, with additional growth in the South. Sales slumped in the Northeast and Midwest.
Home-buying appears poised to improve, however.
“There are good supporting factors behind the housing market,” said Jennifer Lee, a senior economist at BMO Capital Markets.
Strong job growth over the previous year has added nearly 3 million new paycheques to the economy. Mortgage rates have fallen sharply, and home values are rising at a slower clip, giving prospective buyers some financial leeway.
The Realtors expect sales will rise 8 per cent this year to 5.3 million homes. Much of that growth will hinge on first-time buyers getting out of the rental market.
Jed Kolko, chief economist at Trulia, predicts that much of the growth will occur in the suburbs.
For starters, the suburbs are more affordable, with prices rising 5.7 per cent per square foot last year, compared to an 8.1 per cent surge in urban neighborhoods. Secondly, urban populations have risen in recent years because of what Kolko calls a “demographic jolt” from 20-somethings renting close to downtown, a pattern that will soon reverse itself.
“As millennials get older, many will follow a familiar path: They’ll partner up, have kids, and move to the suburbs,” Kolko said in a report released this week.