US home sales edged up 1 percent in December

Sales of existing U.S. homes edged up slightly in December, helping to lift sales for 2013 to the highest level in seven years, the National Association of Realtors reported Thursday.

Sales increased to an annual rate of 4.87 million units last month, up 1 percent from the November sales pace. Both months represented a slower pace of sales than earlier in 2013, reflecting the drag from higher mortgage rates and higher home prices.

For all of 2013, sales totaled 5.09 million units, the best performance since 2006, when sales climbed to 6.48 million. However, the sales gains in both 2005 and 2006 directly contributed to the massive housing bubble and subsequent economic depression, leading millions of Americans to lose their homes as a result of subprime and underwater mortgages.

Analysts say a more normal sales pace would currently be around 5.5 million units.

The median price of an existing home last year was $197,100, an increase of 11.5 percent and the highest price in eight years. Sales of previously owned homes were up 19.5 percent since 2011, but sales fell from September through November and the December level is still 9.6 percent below the summer peak.

"We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population," said Lawrence Yun, chief economist for the National Association of Realtors.

Yun expects sales will remain around the 2013 level of 5.09 million units in 2014, as such factors as tighter mortgage-lending standards and limited inventories impede further progress in the housing market.

But other forecasters are more optimistic. Patrick Newport, an economist at Global Insight, predicted that sales growth would slow a bit from last year's 8.8 percent rise. He predicted a 5.1 percent increase this year to 5.33 million. He said that would represent a "return to normalcy for this portion of the housing market."

Joel Naroff, chief economist at Naroff Economic Advisors, agreed. "The decade of boom, bust and boom in the housing market is nearing an end," he said. "We should be getting back to a more normal market."

Total housing inventory at the end of December was down 9.3 percent to 1.86 million existing homes available for sale. That represents a nearly 5-month supply at the December sales pace.

Over the summer, re-sales reached a pace of 5.39 million, the fastest in four years. But sales began to slow in September as the costs of buying a home rose.

Mortgage rates rose to nearly a full percentage point higher than they were in the spring, when they were at record lows. And a limited supply of homes on the market helped drive up prices. The combination of rising mortgage rates and rising prices made home buying less affordable, particularly for first-time buyers.

Builders started work on 923,000 new homes and apartments in 2013, up 18.3 percent from 2012. It was the fourth straight annual gain and the strongest construction pace since 2007 when 1.36 million homes were started. Economists are looking for further construction gains in 2014.

The Associated Press