By Lucia Mutikani

U.S. Existing Home Sales Rise to 10-Month High

WASHINGTON (Reuters) – U.S. existing home sales increased to a 10-month high in December, but further gains are likely limited by elevated mortgage rates and house prices, keeping many prospective buyers on the sidelines.

Home sales rose 2.2% last month to a seasonally adjusted annual rate of 4.24 million units, the highest level since February, as reported by the National Association of Realtors on Friday.

Economists polled by Reuters had forecast an increase to a rate of 4.19 million units. Sales surged 9.3% year-on-year, marking the largest increase since June 2021.

A total of 4.06 million previously owned houses were sold last year, the lowest number since 1995.

> “Home sales in the final months of the year showed solid recovery despite elevated mortgage rates,” stated Lawrence Yun, the NAR’s chief economist. “Job and wage gains, along with increased inventory, are positively impacting the market.”

A survey from Fannie Mae predicted weak existing home sales in the first half of the year, noting that new homes are now priced competitively with existing homes and are more available. The forecast for the popular 30-year fixed-rate mortgage is an average of 6.7% in the first quarter, dropping to 6.6% in the second quarter.

Mortgage rates increased late last year along with U.S. Treasury yields amid economic resilience, particularly in the labor market, and investor concerns regarding inflation from President Donald Trump’s economic policies.

The Federal Reserve has scaled back its projected interest rate cuts for this year to two from four, as estimated in September when it began its policy easing cycle. The average rate on a 30-year fixed-rate mortgage is just below 7%.

Housing inventory fell 13.5% to 1.15 million units last month. However, supply increased 16.2% from one year ago. The median existing home price rose 6.0% from a year earlier to $404,400 in December, reaching a record high of $407,500 in 2024.

At December’s sales pace, it would take 3.3 months to exhaust the current inventory of existing homes, up from 3.1 months a year ago. A four-to-seven-month supply is considered a healthy balance between supply and demand.

Properties typically stayed on the market for 35 days in December compared to 29 days a year earlier. First-time buyers accounted for 31% of sales versus 29% a year ago, having made up a record low of 24% in 2024. Economists and realtors suggest that a 40% share is needed for a robust housing market.

All-cash sales constituted 28% of transactions last month, down from 29% a year ago. Distressed sales, including foreclosures, represented only 2% of transactions, unchanged from last year.