"The latest decline is harder to explain. Perhaps it is the decline in consumer confidence that's been occurring in the latter half of 2018," said Lawrence Yun, chief economist for the Realtors. "The latest numbers do not reflect the lower, current mortgage rates compared to the November figures, so it's really harder to explain." The supply of homes for sale also rose just more than 3 percent compared with a year ago. Low supply had been holding sales back last spring, despite strong demand, so it would make sense that more supply would boost sales, unless this is a sign that demand is weakening. In fact, the shift was one of the largest that didn't involve some sort of change in government policy, like the homebuyer tax credit. The 6.4 percent monthly move was unusually large, regardless of direction. The tally from the National Association of Realtors generally moves in the very low single digits month to month. "This weakness is certainly due to the sharp home price gains along with the rise in mortgage rates," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. Affordability has been blamed for slower sales over the past six months, but sales in December matched the same pace as in 2000, and Yun argues that affordability is better now. "Today it is actually more affordable compared to year 2000, yet we have about 20 million more jobs, so for home sales to be roughly equivalent means that in 2018 there is an underperformance of the overall housing sector." That underperformance cannot be blamed on the partial government shutdown, as most of these deals would have been signed in October, well before even the threat of that. It also cannot be blamed on stock market volatility, as that didn't really kick into high gear until mid-November. Interest rates did move higher in October but started their slide lower in November, and rates were higher in September as well, so it wasn't a sudden jump. Rates are also still historically low. In fact, mortgage rates in 2000 were twice what they are now. Of course home prices were lower then. "While positive demographics and a solid job market would normally offset this relatively modest rise in mortgage rates, it's been about 10 years since mortgage rates have been as high as they were at the November peak – suggesting that there is a larger share of current homeowners who feel they are 'locked in' at a lower mortgage rate ... reducing the number of them who would be looking for a home at a higher mortgage rate," said David Berson, chief economist at Nationwide. If anything, the drop may be due to the fact that home prices are actually falling in some areas, especially in the West, and in the rest of the nation the gains are shrinking. That makes it easier to afford a home, but less desirable if potential buyers are concerned that their new home's value will immediately depreciate. No one wants to catch a falling knife. The median home price of $259,100 in 2018 was the highest on record. While mortgage rates did drop in December, the expectation is that they will move higher this year, and that will hurt affordability further. "Looking ahead to 2019, expect weaker existing-homes sales as the new year ushered in a government shutdown and worsening economic uncertainty," said Cheryl Young, senior economist at Trulia. WATCH: Housing pulse check<doc-sep>The numbers: Existing-home sales ran at a seasonally adjusted annual rate of 4.99 million in December, the National Association of Realtors said Tuesday. That was the lowest since November 2015. Sales were down 6.4% for the month, and 10.3% lower than the year-ago rate. What happened: Sales of previously-owned homes tumbled in December, capping a dismal year for housing. The full-year sales tally for 2018, 5.34 million, made it the worst year since 2015, when the nascent housing recovery was knocked off course by a mortgage regulation change. December’s pace of sales missed the MarketWatch consensus forecast for a 5.10 million selling pace. Big picture: The housing market wobbled badly last year. Now, all eyes are on the critical spring selling season to determine whether 2018 was a fluke or the beginning of the end of the cycle. Even as sales slipped in December, inventory did as well. At the current sales pace, it would take 3.7 months to exhaust available supply, down from 3.9 months in November. Properties stayed on the market for an average of 46 days in December, up from 42 days in November. But demand is waning: the median sales price in December, $253,600, was only 2.9% higher than a year ago. No regions saw an increase in sales in December, and first-time buyers made up 32% of all transactions in the month, making no headway. Read:Market correction or midterm speed bump? Here’s what real-estate agents are saying about housing What they’re saying: In December, home showings were 7.2% lower than a year ago, the fifth straight month of yearly declines, according to a report from ShowingTime. The company’s data comes from more than 1.2 million active listings that subscribe to its services. “Buyer traffic continues to subside across all regions of the U.S. compared to the record numbers recorded at the same time last year,” ShowingTime said in a statement. “This is potentially good news for buyers, who are seeing less competition in the market.” “In the very near term, we think we could see a brief period of stronger housing data,” said economists at Bank of America Merrill Lynch. “The decline in mortgage rates is very well timed ahead of the spring selling season. We suspect that potential homebuyers who may have been scared from the market during the period of rising rates in the fall could see it as an opportunity to jump back in. Moreover, the labor market is currently very strong with a high number of job openings and upward pressure on wages.” Market reaction: The 10-year Treasury note TMUBMUSD10Y, 1.574% , which most fixed-rate mortgages track, has caught a bid in recent weeks, helping make home loans more affordable for borrowers. Read:3 outside-the-box alternatives for home buyers in a tough housing market<doc-sep>The number of homes sold dropped sharply in December, raising fears that 2019 will be marked by a continued slowdown in the U.S. housing market. Sales of existing homes dropped 10.3 percent last month compared to the same time in 2017, and 6.4 percent from November, according to a report from the National Association of Realtors, cited in the Wall Street Journal. Many markets saw double-digit declines in existing home sales, including much of California, Seattle, Denver, Maryland, Delaware and Philadelphia, according to the report. Last month wrapped up the weakest year for home sales since 2015. The market slowed particularly in the second half of the year amid rising interest rates and a greater uncertainty about the stock market and economy at large. In Chicago, home sales in December fell 16.5 percent year over year, ending a 2018 that saw overall sales drop 3.7 percent and home prices rise 3.2 percent. December also saw price growth slow, as sellers cut their asks in hopes of getting reluctant buyers to bite. Prices grew 1.2 percent in December, a six-year low, according to Redfin. It predicted the cooling off from the second half of 2018 will continue into this year, with housing inventory rising and price growth continuing to pull back. Fewer people think now is a good time to buy a home than at any time at least in the past three years, according to a recent survey by the Realtors association. [WSJ] — John O’Brien<doc-sep>Home sales tumbled in December to their weakest level since 2015, ending a difficult year at a new low and offering fresh evidence that the housing market could be in for a bumpy ride in 2019. Some of the same forces that pounded global financial markets in the fourth quarter caused home buyers to pull back at the end of the year. Home sales were weighed down by a surge in stock-market volatility, uncertainty as the government shutdown began and rising interest rates, which pushed up mortgage rates in November to their highest level in seven years. Housing also suffered from high home prices and a dearth of starter homes in major markets, a nagging problem for much of last year that shows little sign of abating. A growing U.S. economy and low unemployment haven’t kept home sales from sputtering. “We’re in a mental recession,” said Sam Khater, chief economist at Freddie Mac. “It’s a constant stream of negative headlines for a couple of months…it wears on you.” December capped the weakest year for home sales in three years. Existing-home sales fell 6.4% in December from the previous month to a seasonally adjusted annual rate of 4.99 million, the National Association of Realtors said Tuesday. Compared with a year earlier, sales in December declined 10.3%. Weak U.S. home sales—along with overseas concerns after the International Monetary Fund cut its forecast for global growth and new data showed China’s economy growing at its slowest annual pace since 1990—unnerved stock-market investors. The Dow Jones Industrial Average fell 1.2% to 24404.48 on Tuesday, while the tech-heavy Nasdaq closed down 1.9% to 7020.36, ending stocks’ four-day winning streak. Meanwhile, home-price growth has also slowed significantly, a sign that many owners struggling to sell their homes are starting to cut prices or ask for a more conservative number. The median sale price for an existing home in December grew 2.9% from a year earlier—the smallest increase since March 2012, when the market was still depressed from the housing crash. That slump could be good news for buyers, many of whom can’t afford higher prices or worry about another housing bubble, and it could inject some positive momentum into the market. Mortgage rates have also come down in recent weeks, easing concerns that a long era of cheap housing credit was about to end. Rates nearly hit 5% about two months ago, but average rates for a 30-year, fixed-rate mortgage dropped to 4.45% last week, according to Freddie Mac. Purchase mortgage applications grew 9% for the week ending Jan. 11 from a week earlier to the highest level since April 2010, according to a Mortgage Bankers Association index. If rates stay low and stocks rally again, that could also help boost sentiment. Yet December’s numbers were worse than most economists’ predictions, after November home sales seemed to suggest the market could be stabilizing. December’s drop “is much more precipitous than we thought,” said Cheryl Young, a senior economist at Trulia, a housing-data firm. She said the data help confirm the “housing market’s postrecession zenith has come and gone.” The government shutdown could also damp some of the mortgage-rate-driven momentum. A survey by the National Association of Realtors found that economic uncertainty caused by the shutdown is causing buyers to delay. David Ehrenberg, a Redfin agent in Washington, D.C., has seen this pause. A federal government employee he knows had planned to search for a home to beat the spring rush but has put off getting preapproved for a mortgage or seriously looking because he hasn’t been receiving a paycheck. “Buyers are asking about it a lot,” Mr. Ehrenberg said of the shutdown. “It’s just not something that folks are used to going on this long with no end in sight.” The decline in December sales was broad, with Seattle, Portland, much of California, Denver, Maryland, Delaware and the Philadelphia area experiencing double-digit declines, according to an analysis of local multiple-listing service data by Lawler Economic and Housing Consulting. Lindsay Cunningham and Ryan Brim bought a new townhouse in Philadelphia’s trendy Fishtown neighborhood in early December for about $40,000 below the initial asking price and got an additional $10,000 seller concession. The couple, who are in their late 20s, had started looking in the spring and already had seen rates climb from about 4% to more than 4.5%—or an increase in their monthly payment of about $120. That forced them to stretch a bit financially. But Mr. Brim, who works as a mortgage broker, was worried about waiting because he thought rates would keep going up. “I thought we can afford this, even if we might be stretched thin,” Mr. Brim said. The couple’s Realtor, Ashley Lauren Farnschlader, said Ms. Cunningham and Mr. Brim were an exception last fall and many of her clients were holding off on buying. In the first couple of weeks of this year, she said buyers have seemed more enthusiastic as mortgage rates eased. “I think this is a needed correction and it opens up a lot of hope and opportunities for first-time buyers,” she said. The slowdown in December appears to have extended to the new-home market as well. The Commerce Department isn’t expected to release December’s data due to the government shutdown, but an analysis by Redfin found that new-home sales dropped 10.3% in the South in December, 13.4% in the West and more than 16% in the Northeast. The housing market has proved more sensitive to mortgage-rate increases than in previous cycles, in part because prices have been rising much faster than incomes. Federal Reserve Chairman Jerome Powell has indicated that the central bank will be patient and flexible in raising interest rates this year amid global economic turmoil. “Federal Reserve officials were already on the lookout for signs that interest-rate-sensitive sectors of the economy were coming under stress, and right now home sales are the smoking gun that the Fed’s rate hikes are starting to bite and slow the broader economy down,” said Chris Rupkey, chief financial economist at MUFG. Write to Laura Kusisto at laura.kusisto@wsj.com and Sarah Chaney at sarah.chaney@wsj.com<doc-sep>
An 'Open House' sign is displayed in the front yard of a home for sale in Columbus, Ohio. U.S. home sales tumbled to their lowest level in three years in December and house price increases slowed sharply, suggesting a further loss of momentum in the housing market. The National Association of Realtors said on Tuesday existing home sales declined 6.4 percent to a seasonally adjusted annual rate of 4.99 million units last month. That was the lowest level since November 2015. November's sales pace was revised slightly up to 5.33 million unit from the previously reported 5.32 million units. Economists polled by Reuters had forecast existing home sales falling 1.0 percent to a rate of 5.25 million units in December. Existing home sales, which make up about 90 percent of U.S. home sales, plunged 10.3 percent from a year ago. For all of 2018, sales fell 3.1 percent to 5.34 million units, the weakest since 2015. The housing market has been stymied by higher mortgage rates as well as land and labor shortages, which have led to tight inventory and more expensive homes. But there are glimmers of hope for the sector. The 30-year fixed mortgage rate has dropped a four-month low, with much of the moderation occurring in the second half of December, and house price inflation is slowing. A survey last week showed a rebound in homebuilders confidence in January amid optimism over market conditions now and over the next six months, as well buyer traffic. Homebuilders are hopeful that the moderation in mortgage rates "will help the housing market continue to grow at a modest clip as we enter the new year." A month-long partial shutdown of the federal government, which has delayed data on new home sales, housing starts and building permits is, however, making it difficult to get a good read of the housing market. Last month, existing home sales fell in all four regions. There were 1.55 million previously owned homes on the market in December, down from 1.74 million in November, but up from 1.46 million a year ago. At December's sales pace, it would take 3.7 months to exhaust the current inventory, down from 3.9 in November. A six-to-seven-months supply is viewed as a healthy balance between supply and demand. The median existing house price increased 2.9 percent from a year ago to $253,600 in December. That was the smallest increase since February 2012.