WASHINGTON - Sales of previously owned U.S. homes rose in December, a sign historically low unemployment and low mortgage rates are propelling the U.S. housing market as it enters a new year.
Home sales increased 3.6% in December compared with November to a seasonally adjusted annual rate of 5.54 million, the National Association of Realtors said Wednesday.
Existing-home sales were up 10.8% in December from a year earlier. Total sales ended 2019 at 5.34 million, the same pace as in 2018.
Further, borrowing conditions for homeowners are generally better than a year ago. The average interest rate on a 30-year fixed mortgage was 3.65% as of Jan. 16, according to Freddie Mac, up slightly from September's lows but below year-earlier levels.
One persistent drag on the housing market has been a dearth of inventory.
"We are facing this dire housing shortage," said NAR chief economist Lawrence Yun. "We need to build more."
At the current sales pace, there was a 3.0-month supply of homes on the market at the end of December, compared with 3.7 in November and in December 2018. December's inventory was the lowest for NAR records tracing back two decades. Limited housing stock has contributed to higher home prices, with the median sales price for an existing home in December up 7.8% on year to $274,500.
Inventory has been particularly tight at the cheaper end of the market, restraining sales. Inventory for homes priced below $100,000 declined 14.3% in December from a year earlier.
Some positive signs have emerged that suggest more inventory could soon flow onto the market. The National Association of Home Builders reported its housing market index, which measures industry confidence, remained near a two-decade high in January, and construction of new U.S. homes rose in December to the highest level since 2006, the Commerce Department said last week.