Purchases of previously owned homes climbed in December for the first time in five months as job gains and healthier household balance sheets helped Americans adjust to higher mortgage rates.
Sales rose 1 percent to a 4.87 million annual pace, less than projected, figures from the National Association of Realtors showed today in Washington. Purchases in the Northeast and Midwest fell, which may have reflected bad weather, the group said. The median forecast of economists in a Bloomberg survey called for a 4.93 million rate.
The gain capped the strongest year for the industry since 2006, a sign faster employment growth and a decline in consumer debt helped give buyers more confidence to make purchases. Builder confidence has also picked up along with new construction, signaling housing will be a source of strength for the economy this year.
"We might have seen a stronger increase if it wasn't for bad weather," said David Sloan, a senior economist at 4Cast Inc. in New York, who correctly projected the December sales pace. "There is sufficient tightness in the housing market" to encourage construction, he said. "Overall, the housing market has got solid underpinnings."
Estimates in the Bloomberg survey of 76 economists ranged from a sales pace of 4.8 million to 5.1 million. November's figure was revised to 4.82 million from a previously reported 4.9 million. Purchases increased 9.1 percent in 2013 to 5.09 million.
Another report today showed applications for unemployment benefits held near a six-week low, showing firings remain muted following the holidays. Jobless claims rose by 1,000 to 326,000 in the period ended Jan. 18, the Labor Department said in Washington.
Stocks dropped as a gauge of China's manufacturing contracted. The Standard & Poor's 500 Index declined 1 percent to 1,826.44 at 10:56 a.m. in New York.
The median price of an existing home rose 9.9 percent to $198,000 in December from $189,200 a year earlier, today's report showed. For all of 2013, the median price climbed 11.5 percent, the most in eight years, to $197,100.
The number of existing properties for sale fell 9.3 percent to 1.86 million from a month earlier. At the current pace, it would take 4.6 months to sell those houses, the lowest since February, compared with 5.1 months at the end of November. Inventory was up from 1.83 million a year earlier.
Purchases of single-family homes increased 1.9 percent to an annual rate of 4.3 million. The sales pace of multifamily properties including condominiums fell 5 percent to 570,000.
Cash transactions accounted for about 32 percent of all purchases in December, the report showed.
Sales of distressed property, including foreclosures, accounted for 14 percent of the total last month, matching the share in November.
First-time buyers accounted for 27 percent of all purchases in December, the lowest since at least 2008.
"Normal would be closer to 40 percent," NAR chief economist Lawrence Yun said at a news conference as the figures were released. "Two opposing forces are at work. One is job creation which is positive factor for housing. But the negative is fast-declining affordability," due in part to higher prices.
Existing-home sales, which are tabulated when a purchase contract closes, are recovering from a 13-year low of 4.11 million in 2008 after reaching a record 7.08 million in 2005.
Sellers faced a hurdle of inclement weather in December. The extent of snow cover in the contiguous U.S. was the eighth-largest on record for the month, according to the National Oceanic and Atmospheric Administration. It also marked the coldest December since 2009, the agency said.
Existing-home sales declined 4.3 percent in the Midwest and 1.5 percent in the Northeast, today's figures showed. They increased 4.8 percent in the West and 3.6 percent in the South.
The median time a home was on the market jumped in December to 72 days from 56 days a month earlier as "adverse weather reportedly delayed closings in many areas," the Realtors group said in a statement.
The housing rebound last year gained traction amid job gains and rising stock values. Residential construction starts soared in November to a five-year high. Sustained demand and a shortage of properties for sale have prompted builders to break ground on more dwellings, and mortgage lenders are reporting fewer delinquencies and healthier portfolios.
At the same time, higher borrowing costs are triggering a slowdown in sales that has affected mortgage lenders. At JPMorgan Chase & Co., the biggest U.S. bank by assets, home loan applications fell 23 percent from the previous quarter. Wells Fargo & Co reported originations down 38 percent at the end of December from three months earlier as demand for refinancing slumped.
At Regions Financial Corp. in Birmingham, Alabama, mortgage production fell last year even as overall lending increased $4.5 billion, about 8 percent, as people took advantage of low interest rates earlier in 2013.
"Consumer balance sheets are healthier than they've been in some time, corporate balance sheets are in solid condition and the housing market in our communities continues to improve," Chairman and Chief Executive Officer Grayson Hall said on a Jan. 21 earnings call. "These factors, along with an improving global outlook, should contribute to moderate to improving GDP growth in 2014."
The average 30-year, fixed-rate mortgage was 4.41 percent for the week ended Jan. 16, compared with 3.38 percent a year ago, according to Freddie Mac in McLean, Virginia.