The headline existing home sales improved relative to last month with the NAR stating "Conditions for buying are favorable and will likely continue in 2020.".

Analyst Opinion of Existing Home Sales

The rolling averages for existing home sales have been improving since early 2019. The rolling averages are now well into expansion. This report is much stronger than last month. Housing inventory (homes for sale) has dropped to 21st-century lows.

Econintersect Analysis

• The unadjusted sales rate of growth accelerated 15.6 % month-over-month, up 15.1 % year-over-year - sales growth rate trend significantly accelerated using the 3-month moving average.
• The unadjusted price rate of growth accelerated by 1.8 % month-over-month, up 5.9 % year-over-year
• The homes for sale unadjusted inventory declined this month compared to last month and remains historically low.

NAR reported:

• Sales up 3.6 % month-over-month, up 10.8 % year-over-year
• Prices up 7.8 % year-over-year
• The market (from Econoday) expected existing home sales level of 5.390 M to 5.500 M (consensus 5.430 M) with a reported value of 5.54

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The graph below presents the unadjusted home sales volumes.

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Here are the headline words from Lawrence Yun, NAR's chief economist:

Home sales fluctuated a great deal last year. I view 2019 as a neutral year for housing in terms of sales. Home sellers are positioned well, but prospective buyers aren't as fortunate. Low inventory remains a problem, with first-time buyers affected the most.

Conditions for buying are favorable and will likely continue in 2020. We saw the year come to a close with the economy churning out 2.3 million jobs, mortgage rates below 4% and housing starts ramp up to 1.6 million on an annual basis. If these factors are sustained in 2020, we will see a notable pickup in home sales in 2020.

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To remove the seasonality of home prices, here is a year-over-year graph that demonstrates a general improving home price rate of growth in 2019.

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Econintersect does a more complete analysis of home prices with the Case-Shiller analysis.

The home price situation according to the NAR:

The median existing-home price2 for all housing types in December was $274,500, up 7.8% from December 2018 ($254,700), as prices rose in every region. November's price increase marks 94 straight months of year-over-year gains. "Price appreciation has rapidly accelerated, and areas that are relatively unaffordable or declining in affordability are starting to experience slower job growth," Yun said. "The hope is for price appreciation to slow in line with wage growth, which is about 3%."

According to the NAR;

First-time buyers were responsible for 31% of sales in December, moderately down from the 32% seen in both November and in December 2018. NAR's 2019 Profile of Home Buyers and Sellers - released in late 20194 - revealed that the annual share of first-time buyers was 33%.

Individual investors or second-home buyers, who account for many cash sales, purchased 17% of homes in December 2019, up from both 16% in November and 15% in December 2018. All-cash sales accounted for 20% of transactions in December, unchanged from November and down slightly from 22% in December 2018.

Unadjusted Inventories are below the levels of one year ago.

Total housing inventory3 at the end of December totaled 1.40 million units, down 14.6% from November and 8.5% from one year ago (1.53 million). Unsold inventory sits at a 3.0-month supply at the current sales pace, down from the 3.7-month figure recorded in both November and December 2018. Unsold inventory totals have dropped for seven consecutive months from year-ago levels, taking a toll on home sales.

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Caveats on Use of NAR Existing Home Sales Data

The National Association of Realtors (NAR) is a trade organization. Their analysis tends to understate the bad and overstate the good. However, the raw (and unadjusted) data is released which allows a completely unbiased analysis. Econintersect analyzes using the raw data. Also, note the National Association of Realtors (NAR) new methodology has a moderate back revision to the data - so it is best to look at trends, and not get too excited about each month's release.

Econintersect determines the month-over-month change by subtracting the current month's year-over-year change from the previous month's year-over-year change. This is the best of the bad options available to determine month-over-month trends - as the preferred methodology would be to use multi-year data (but the New Normal effects and the Great Recession distort historical data).