US existing home sales hit 14-year record despite pandemic

Record low mortgage rates amid the coronavirus pandemic fueled a US housing boom last year, pushing existing home sales to the highest since 2006, according to a survey released Friday.

Existing home sales totaled 5.64 million in 2020, 5.6 percent higher than in 2019, the National Association of Realtors (NAR) said.

Even as prices rose due to high demand and constrained supply, low borrowing rates and the pandemic's disruptions to daily life allowed those who could afford it to buy homes.

In December, the pace of sales rose more than expected to 6.76 million annualized, 0.7 percent more than November but 22.2 percent higher than the same month last year.

"Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic," NAR Chief Economist Lawrence Yun said.

"What's even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market."

Ian Shepherdson of Pantheon Macroeconomics disagreed, saying much of the gains were fueled by a wave of home buying that peaked over the summer.

"We expect a renewed, sustained, increase in housing activity in the spring, when the Covid pandemic should be receding, but sales are unlikely to rise further before then," he said in an analysis.

Homebuilders have struggled to keep up as sales of new and existing homes boomed, with inventory dropping to 1.07 million units, 16.4 percent lower than November and down 23 percent from the year-ago period.

Unsold inventory is at a 1.9-month supply, NAR said, an all-time low.

Strong demand caused prices to jump 12.9 percent in December from the same month in 2019 to a median of $309,800.

Joel Kan of the Mortgage Bankers Association warned the rising prices and tightening inventory could cut into future sales.

"More acute affordability challenges will emerge if inventory stays this tight and home-price growth continues to accelerate," he said in a statement. "This in turn would be especially challenging for first-time homebuyers, who make up a third of all home sales."