Last month, there was speculation that new federal guidelines, known as TRID-RESPA or “Know Before You Owe,” temporarily drove down home sales in November because it pushed pending sales to a December closing. December’s 14.7% sharp increase in existing home sales supported this speculation. December’s small month-over-month increase of 0.1% pending home sales further suggests that it was the new guidelines, not a sharp increase in demand that drove existing sales last month.
2015 was a positive year for pending home sales, as each month finished with a year-over-year increase in signed contracts. This is sharp contrast to 2014, where 9 of 12 months showed a year-over-year decrease. However, 2015 ended on a less than stellar note. Monthly year-over-year gains dropped from a high of 12.1% in February to 2.5% in November, but rebounded to 4.2% in December. A sharp drop in inventory from December 2014 likely suppressed end of the year gains.
Regionally, there was wide variation in pending home sales. The Northeast led the country with year-over-year gains of 15.3%, but gains were much more modest elsewhere. The Midwest, West, and South posted year-over-year gains of just 3.6%, 3.4%, and 1%, respectively.
Finally, today’s Census Homeownership and Vacancy Survey release also provides optimism that the homeownership rate may have hit bottom in 2015. The bureau’s seasonally adjusted homeownership rate in the fourth quarter increased slightly to 63.7% from 20-year lows of 63.5% in the second quarter of 2015. Of particular note was the sharp increase in the homeownership rate for Gen X’ers. Households aged 35-44 increased their homeownership rate a full 1.2 percentage points, moving from 58.1% to 59.3%. Many Gen Xers lost their homes during the recession, so this is a positive sign that we may be seeing boomerang buyers coming back into housing market. However, the increase was not statistically significant from a year ago.
Existing Home Sales and Homeownership Highlights:
- Pending home sales in December were up 4.2% year-over-year, and 0.1% month-over-month.
- Pending home sales in each month of 2015 showed year-over-year gains, but slowed considerably from the beginning of the year to the end.
- Pending sales jumped in the Northeast led the pack with an 15.3% increase year-over-year.
- The ownership rate increased slightly to 63.7%, but ages 35-44 showed a 1.3% point jump.