Wrapping up last year, December 2020 home sales remained strong. After a relatively uneventful week for mortgage markets, rates ended slightly lower. However, mortgage rate levels were still a bit above the record-low levels seen late in 2020.
December 2020 Home Sales Update
The housing sector suffered in the spring of 2020. This is mainly attributed to the partial economic shutdown. However, the spectacular housing market rebound continued.
Existing December 2020 home sales unexpectedly increased from November. They were also 22% higher than the numbers in 2019.
Looking at the full year, 2020 saw the strongest sales pace since 2006. As a result, the median existing-home price was 13% higher than a year ago.
2021 Housing Inventory Levels
Although December 2020 home sales remained strong, housing inventory levels declined 23% from the previous year. In the process, December 2020 housing inventory levels hit record lows. To date, they remain the primary obstacle to even stronger sales activity.
Overall, homes for sale were at just a 1.9-month supply nationally. Unfortunately, this is well below the 6.0-month supply (which is considered a healthy balance between buyers and sellers).
The Latest on Housing Starts
Encouragingly, Thursday’s report on December 2020 housing starts contained optimistic news. In December, single-family housing starts unexpectedly rose 12% from November. Concurrently, they were 28% higher than a year ago.
December was the eighth straight month of housing starts gains. Similarly, single-family building permits increased 8% from November. They were also 30% higher than a year ago. In general, single-family permits are a leading indicator for future construction.
European Central Bank Update
The European Central Bank (ECB) made no policy changes at Thursday’s meeting and repeated that its massive bond purchase program will run until at least March 2022.
The meeting statement said that the ECB “decided to reconfirm its very accommodative monetary policy stance.”
Looking Ahead After December 2020 Home Sales
December 2020 home sales represent a positive outcome for the United States economy. Looking ahead, investors will continue watching COVID-19 case counts and vaccine distribution.
Also, Fed officials emphasized there will not be rate hikes in the near future. Therefore, investors are looking for guidance on the Fed’s inflation outlook and its bond purchase program.
Beyond that, fourth-quarter GDP data will be released on Thursday. GDP is considered the broadest measure of economic activity.
The core PCE price index, the inflation indicator favored by the Fed, will come out on Friday.
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