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Resales of existing homes drop in December on lack of supply

WASHINGTON -- Resales of U.S. existing homes unexpectedly dropped in December, as the lowest supply in more than a decade cut into the industry’s best year since 2007.

Purchases fell 1 percent to a 4.94 million annual rate last month, figures from the National Association of Realtors (NAR) showed Tuesday.

The reading was still the second-highest since November 2009.

Even with December’s setback, 4.65 million homes were sold for all of 2012, the most in five years and a sign the housing market is taking steps toward recovery.

The usual drop in supply at this time of year combined with a pickup in demand spurred by historically low mortgage rates, an improving job market and an increasing number of households risks keeping inventories lean, pushing prices up even higher after last year’s rebound.

“This isn’t worrisome at all,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. “For the first time in a while, it looks like it’s a sellers’ market as much as it’s a buyers’ market. I suspect prices and sales will go up again in 2013.”

November’s pace was revised to 4.99 million from a previously reported 5.04 million.

Sales last year climbed 9.2 percent from 4.26 million in 2011.

The median price of an existing home rose to $180,800 last month, up 11.5 percent from $162,200 in December 2011. It was the biggest year-over-year gain since November 2005.

California pace

San Diego and California home resales and prices both posted gains in December, according to the California Association of Realtors (CAR).

Closed escrow resales of existing homes in San Diego were up 9.5 percent in December from November, and up 9 percent from December 2011.

The San Diego median resale price jumped 3.5 percent to $418,290 in December from November. The price was up 16.2 percent over December 2011.

The CAR's Unsold Inventory Index for San Diego fell to three months in December, down from 3.8 in November and five in December 2011.

California resales totaled an annualized rate of 522,510 in December, up 0.8 percent from November and 0.9 percent from December 2011.

The statewide median price climbed 5 percent in December to $366,930 from November, and was up 27 percent from December 2011, according to the CAR.

Another measure of prices, the S&P/Case-Shiller index of homes in 20 cities, most recently showed home values increased 4.3 percent in October from a year earlier, the biggest gain since May 2010.

The gauge is up almost 9 percent since reaching a 10-year low in March.

The number of previously owned homes on the market dropped to 1.82 million, the fewest since January 2001, according to the NAR report.

At the current sales pace, it would take 4.4 months to sell those houses, the lowest since May 2005, compared with 4.8 months at the end of November.

Inventory concern

“The only concern going into 2013 is the inventory situation,” Lawrence Yun, NAR chief economist, said Tuesday as the figures were released.

“Price increases are almost guaranteed going into 2013,” he said, adding that the group’s projection of a 4 percent to 5 percent increase this year may be exceeded.

Record-low borrowing costs underpinned housing gains last year. The average rate on a 30-year, fixed mortgage was 3.38 percent last week, hovering near the 3.31 percent reached a month earlier that was the lowest in data going back to 1972, according to McLean, Va.-based Freddie Mac (OTC: FMCC).

2013 outlook

Progress will probably build in 2013.

Resales of existing homes will rise about 7.2 percent to 4.98 million this year, the highest since 2007, according to the median estimate of economists and housing analysts surveyed by Bloomberg.

Prices will gain 3.3 percent after an estimated 4.5 percent jump in 2012, according to the forecasters.

“After seven years of navigating an unprecedented market downturn, we finally saw stabilization and recovery in 2012,” Stuart Miller, chief executive officer of Lennar Corp. (NYSE: LEN), the largest U.S. homebuilder by market value, said during on Jan. 15.

“While there have been and still are economic and political uncertainties ahead, we feel that this housing recovery is fundamentally based and driven by a long-term demographic need for housing. 2012, therefore, we believe is just the beginning of the recovery.”

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