2006 Third Highest Sales Year on Record

Existing-home sales eased but prices stabilized as inventories tightened in December, according to the latest research by the NATIONAL ASSOCIATION OF REALTORS®.
REALTOR® Magazine Online
Existing-home sales eased but prices stabilized as inventories tightened in December, according to the NATIONAL ASSOCIATION OF REALTORS®. Nevertheless, 2006 marked the third highest sales year on record. NAR began tracking home sales in 1968.

David Lereah, NAR’s chief economist, says home sales remain historically high. “Despite all of the doom-and-gloom stories and dire predictions over the last year, 2006 was the third strongest year on record for existing-home sales,” he says. “It looks like we’re moving beyond the low for the housing cycle last fall, and buyers are responding to historically low interest rates and competitive pricing by home sellers. In addition, a tightening inventory of homes on the market is supporting prices.”

Total existing-home sales — including single-family, townhomes, condominiums, and co-ops — eased 0.8 percent to a seasonally adjusted annual rate of 6.22 million units in December compared with 6.27 million in November. Sales were 7.9 percent lower than a 6.75 million-unit pace in December 2005.

There were 6,480,000 existing-home sales in 2006, down 8.4 percent from a record of about 7,075,000 in 2005. The second highest total was 6,779,000 in 2004.

A Closer Look at the Numbers

Total housing inventory levels fell 7.9 percent at the end of December to 3.51 million existing homes available for sale, which represents a 6.8-month supply at the current sales pace — down from a 7.3-month supply in November.

The national median existing-home price for all housing types was $222,000 in December, which is unchanged from December 2005. The median is a typical market price where half of the homes sold for more and half sold for less. The 2006 median price was also $222,000, up 1.1 percent from a median of $219,600 in 2005.

Meanwhile, the national average commitment rate for a 30-year conventional, fixed-rate mortgage was 6.14 percent in December, down from 6.24 percent in November, according to Freddie Mac. The December rate was the lowest since October 2005 when it averaged 6.07 percent.

Furthermore, single-family home sales slipped 1.3 percent to a seasonally adjusted annual rate of 5.44 million in December from 5.51 million in November, and were 7.2 percent lower than the 5.86 million-unit pace in December 2005. In 2006, single-family sales declined 8.1 percent to 5.68 million, the third strongest total on record.

The median existing single-family home price was $221,600 in December, which was unchanged from a year ago. The median single-family price for 2006 was $222,000, up 1.4 percent from 2005.

Existing condominium and cooperative housing sales rose 2.1 percent to a seasonally adjusted annual rate of 777,000 units in December from an upwardly revised level of 761,000 in November. Last month’s sales activity was 12.2 percent lower than the 885,000-unit pace in December 2005.

After setting 10 consecutive annual records, condo sales in 2006 fell 10.4 percent to 803,000 units, the third highest year on record. The median existing condo price was $227,000 in December, which was 0.3 percent above a year ago. The median 2006 condo price was $221,800, down 0.9 percent from 2005.

By Region

Here’s what happened regionally in December:

    • Existing-home sales in the Midwest rose 4.3 percent in December to a level of
      1.47 million, but were 5.8 percent lower than December 2005. The median price
      in the Midwest was $167,000, which is 2.9 percent below a year ago.

    • Existing-home sales in the South increased 0.8 percent to an annual sales rate
      of 2.49 million in December, but were 7.1 percent below a year ago. The median
      price in the South was $182,000, unchanged from December 2005.

    • Existing-home sales in the Northeast declined 2.8 percent to a level of 1.04
      million in December, and were 5.5 percent below December 2005. The median
      existing-home price in the Northeast was $283,000, up 3.7 percent from a year
      earlier.

    • Existing-home sales in the West fell 9.1 percent to an annual pace of 1.20
      million in December and were 15.5 percent lower than a year ago. The median
      price in the West was $349,000, up 1.5 percent from December 2005.

Expect Steady Gains

NAR President Pat Vredevoogd Combs, from Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt, says the market has clearly settled with some minor monthly fluctuations. “We expect home sales to rise modestly over the course of this year,” Combs says. “Although local markets vary, price appreciation will be below normal in most of the country this year, but we’re looking for slow, steady gains in both home sales and prices through 2008.”