Home sales in December were a percent lower than November, but still 13% higher than last December. Home sales were up 9% during 2012, the highest annual sales volume since 2007.
Prices increased 4.4% as the inventory of homes for sale continues to lag behind the increase in sales volume. New listings were 5.2% lower than last year while closed sales were up 19.1%. Total market time (average days on market) fell 21.5%.
Economics 101 at work, low supply and high demand equals higher prices. This trend is forecasted to continue in the short term until the supply increases to satisfy demand.
The National Association of Realtors has identified several reasons why the inventory remains low:
1. Many homeowners are underwater. According to CoreLogic, about 22% of homeowners with a mortgage owe more than their home is worth. Owners who are underwater are not likely to sell unless their life circumstances dictate.
2. Others don't have enough equity to "trade up." About 10 million homeowners have less than 20% equity in their current home. Traditionally, homeowners have relied on their equity to help offset their selling expenses and putting a down payment on their next home.
3. Everyone wants to buy at the bottom, but few want to sell. Owners who are not motivated by life circumstances will wait to sell until prices rebound to higher levels to maximize their current investment.
4. More purchases from investors. Investors have increasingly bought homes to rent rather than flipping them for quick profits.
5. Banks have been slower at foreclosing. New state and federal rules governing loan modifications and foreclosures have slowed the foreclosure process and reduced the number of foreclosed properties that hit the market.
6. Builders have been building fewer homes. New construction during 2009 through 2011 was sluggish. New construction has just started to rebound.