Morning Briefing: Existing home sales best in a decade

by Steve Randall25 Jan 2017
Existing home sales best in a decade
Last year was the best in a decade for existing home sales with 5.45 million units sold.

The National Association of Realtors says that 2016’s total was above the 5.25 million of the previous year although still some way behind the 2006 record of 6.48 million.

December saw a slide though with a seasonally adjusted annual rate of 5.49 million, down 2.8 per cent from the upwardly revised 5.65 million in November.

"Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market," he said. "However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December," said Lawrence Yun, NAR chief economist.

He added that the increase in mortgage rates ahead of the Fed’s interest rate hike in December subdued sales.

First-time buyers made up 32 per cent of December purchases, continuing the medium-term trend but below the year’s average of 35 per cent.

"Constrained inventory in many areas and climbing rents, home prices and mortgage rates means it's not getting any easier to be a first-time buyer," said Yun. "It'll take more entry-level supply, continued job gains and even stronger wage growth for first-timers to make up a greater share of the market."
 
Short-term rentals recoup home price faster than long-term tenants
Homeowners could recoup the purchase price of their homes faster through short-term rentals such as Airbnb compared to a long-term rental strategy.

British real estate firm Nested analyzed home price data from HSBC and the World Bank and average rental costs in 75 global cities which revealed just how much faster short-term rentals can bring a return on investment.

In the US, Washington DC ranks the best. To recoup the cost of an average-priced home ($798,258) would take 219 months at an average rent of $3,648. Short-term rentals would bring in $12,468 per month, recouping the cost of the home in just 64 months.

In Los Angeles, an average home costing $873,352 would mean renting for 278 months at an average $3,143 rent; with short-term rentals, the cost would be recouped in just 122 months.

Meanwhile, the cost of an average Chicago home ($471,462) would be recouped in 126 months from short-term rentals compared to 173 months with long-term tenants.
 
Virginia ended 2016 on a high
Home sales in Virginia were just shy of $38 billion in 2016, up 8 per cent compared to the previous year.

In the fourth quarter of 2016 there were 26,308 closed sales of homes, up 6.8 per cent from the same period of 2015 while the median price ticked higher by 3.9 per cent year-over-year to $265,000.

“The fourth quarter sealed a year of impressive strength in Virginia’s housing market,” said 2017 Virginia REALTORS® President Claire Forcier-Rowe. “For buyers and sellers, 2016 was a year of opportunity.
Particularly as inventory constraints eased in the last half of the year, we saw surges in activity and price. Buyers have been able to take advantage of low rates, even as they rose in the last quarter, and invested confidently at the end of the year. Sellers are poised to profit from sustained high demand as we move into 2017.”
 

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