Purchases of previously owned U.S. homes rose less than forecast in December as higher prices discouraged first-time buyers.
Contract closings increased 2.4 percent to a 5.04 million annual rate from a 4.92 million pace in the prior month, figures from the National Association of Realtors showed Friday in Washington. The median forecast of economists in a Bloomberg survey called for a rise to 5.08 million. The number of available properties was the smallest in almost two years.
The share of Americans purchasing their first home dropped in 2014 to its lowest level in almost three decades, according to the Realtors group. At the same time, employment gains and mortgage rates at historically low levels will help underpin sales, provided that properties remain affordable.
“Demand has been pretty sideways,” said Jay Feldman, an economist at Credit Suisse in New York, who projected a 5.03 million pace for December sales. “As the job market improves, first-time buyers will perhaps be less of a headwind. Low mortgage rates will provide support.”
Sales of previously-owned properties fell 3.1 percent to 4.93 million in 2014. A year earlier, 5.09 million homes were sold, the most since 2006.
“First-time buyers are still missing in action,” Lawrence Yun, NAR chief economist, said at a news conference as the figures were released. The market in 2014 was “mildly disappointing.”
Falling interest rates, more jobs and higher confidence indicate “pent-up demand continues to build,” he said. “2015 should be a better year.”
The median price of an existing home advanced 6 percent in December from the same period a year earlier, to $209,500, the Realtors’ report showed. The median selling price in 2014 was the highest in seven years.
First-time buyers accounted for 29 percent of all purchases in December, down from 31 percent a month earlier, the report showed.
The number of previously owned homes on the market fell 11.1 percent to 1.85 million, the fewest since January 2013. At the current sales pace, it would take 4.4 months to sell those houses compared with 5.1 months at the end of the prior month. Less than a five months’ supply is considered a tight market, the Realtors group has said.
Sales of existing single-family homes increased 3.5 percent to an annual rate of 4.47 million. Purchases of multifamily properties – including condominiums and townhouses – fell 5 percent to a 570,000 pace.
Total purchases rose 9.8 percent in the West and 3.8 percent in the South. Demand fell 3.5 percent in the Midwest and 2.9 percent in the Northeast.
All-cash transactions made up about 26 percent. Distressed sales, comprised of foreclosures and short sales, accounted for 11 percent of the total, up from November’s 9 percent.
Even with the gains, the housing recovery still has a ways to go. A record 7.08 million previously-owned houses were sold in 2005. Three years later, existing-home sales plunged to a 13-year low of 4.11 million.
Existing home sales account for more than 90 percent of the residential market. New-home purchases, which make up about 7 percent, are considered a timelier barometer.