PMC Mortgage Lender's Blog

A year-long snapshot of the housing market indicates an improving market, according to statistics recently released by the National Association of Realtors (NAR).

For all of 2011, existing-home sales rose 1.7 percent to 4.26 million units, but the big gains came at the end of 2011. An upsurge in activity in the last three months of the year culminated in a December sales increase of 5.0 percent.

NAR's 2011 December sales data includes a 4.6 increase in single-family home sales. Existing condominiums and co-ops registered an 8.7 percent sales increase. All-cash sales, mainly from investors, increased 3.0 percent and accounted for 31 percent of purchases in December, up 2.0 percent from a year earlier.

Falling mortgage interest rates were a contributing factor to the year-end sales increases. The national average commitment rate for a conventional 30-year, fixed-rate mortgage fell to a record low of 3.96 percent in December, according to Freddie Mac.

Lawrence Yun, NAR's chief economist offered his analysis of consumer sentiment stating, “record low mortgage interest rates, job growth and bargain home prices are giving consumers the confidence they need to enter the market.”

Home sellers would like to channel more of that “consumer confidence” into home-buying action. Another important market factor may help them realize their goal: a falling housing inventory.

At the end of December 2011, NAR statistics revealed the available housing inventory for sale dropped 9.2 percent to 2.38 million existing homes. This represents a 6.2-month supply, the lowest level since March 2005 where 2.30 million homes were on the market.

Economists can easily predict the effect a falling housing inventory has on prices as “many markets will see prices stabilize or grow moderately in the near future,” states Yun.

Less available housing inventory will mean fewer selections and increased competition for choice properties. NAR president, Moe Veissi predicts “more buyers are expected to take advantage of market conditions this year. We have a large pent-up demand.”

The market still faces many challenges including the 33 percent of NAR members reporting contract failures. This figure has remained unchanged from November to December.

The main culprits are declined mortgage applications and failures in loan underwriting where appraised values fall short of the negotiated contract price. Only 9 percent of NAR members reported these incidences in December 2010.

NAR’s statistical data is derived from completed transactions provided from multiple listing services and includes single-family homes, townhomes, condominiums and co-ops.