WASHINGTON, Jan 22 (Reuters) – U.S. home sales jumped to their highest level in nearly two years in December, the latest indication that lower mortgage rates are helping the housing market to regain its footing after hitting a soft patch in 2018.
The National Association of Realtors said on Wednesday that existing home sales increased 3.6% to a seasonally adjusted annual rate of 5.54 million units last month, the highest level since February 2018. November’s sales pace was unrevised at 5.35 million units.
Economists polled by Reuters had forecast existing home sales would increase 1.3% to a rate of 5.43 million units in December. Last month, existing home sales rose in the Northeast, West and the populous South. But sales fell in the Midwest.
Existing home sales, which make up about 90% of U.S. home sales, surged 10.0% on a year-on-year basis in December. For all of 2019, sales were unchanged at 5.34 million units.
The report came on the heels of government data last week showing homebuilding surged to a 13-year high in December.
The housing market is being supported by cheaper mortgage rates after the Federal Reserve cut interest rates three times last year. The 30-year fixed mortgage rate has dropped to an average of 3.65% from its peak of 4.94% in November 2018, according to data from mortgage finance agency Freddie Mac.
But the sector, which accounts for about 3.1% of gross domestic product, remains constrained by a lack of homes, especially in the lower-price segment of the market, because of land and labor shortages.
There were a record-low 1.40 million previously owned homes on the market in December, down 14.6% from November and 8.5% from a year ago. The median existing house price soared 7.8% from a year ago, the most since January 2016, to $274,500 in December. House prices increased 4.8% in 2019.
At December’s sales pace, it would take 3.0 months to exhaust the current inventory, down from 3.7 months in November. A six-to-seven-month supply is viewed as a healthy balance between supply and demand. (Reporting by Lucia Mutikani Editing by Paul Simao)