Home Sales Expected to Cool after Big Year!

WSJ - home sales expected to cool after big year

Sales of previously owned homes finished 2013 at their
highest level in seven years, but a slowdown in recent
months suggests the market is cooling after two years
of strong gains.  Sales rose 1% in December to a
seasonally adjusted annual rate of 4.87 million, the
National Association of Realtors said Thursday. But
that was the first increase since July and the
second-weakest month of the year, behind November.  The
trade group said 5.09 million existing homes were sold
throughout 2013�up 9% from 2012 and the highest level
of sales since 2006.  Though many economists expect the
housing market's improvement to continue, last year's
growth rate is unlikely to be maintained.  The pace is
"not sustainable," said Joel Naroff, chief economist at
Naroff Economic Advisors. "With mortgage rates likely
to move up this year, sales and price gains will likely
be about half of what we saw last year."  The number of
homes on the market remains low, at a 4.6-month supply
compared with the six-month supply that is considered
healthy. Tight inventories are putting upward pressure
on prices, and the median existing-home price rose to
$198,000 in December, up 9.9% from a year earlier.

The price gains also reflect fewer homes sold at a
discount through short sales and foreclosures.
Conventional sales rose 12% last year while distressed
sales fell by about a third, said Jed Kolko, chief
economist at real-estate website Tulia.  "Conventional
sales are picking up the slack and that shift is
positive for the housing recovery," he said.  Sales of
previously owned homes had trended up from early 2011
until last summer, when rising prices, limited supply
and higher mortgage rates�which make monthly payments
more expensive�undercut demand. Because it typically
takes one or two months for a buyer to close on a home,
December's sales data reflect offers made in October
and November.  At the end of November, the average
interest rate on a 30-year, fixed-rate mortgage was
4.29%, according to Freddie Mac�almost a percentage
point higher than rates in early May.  "Falling
affordability is hindering buying activity," said
Lawrence Yun, NAR chief economist. Mr. Yun expects 2014
sales to hold flat compared with last year and foresees
mortgage rates reaching 5.3% by the end of the year.