Americans retreated from purchasing homes in December, as the number of properties listed for sale sank to its lowest level since 1999.
The National Association of Realtors said on Tuesday that sales of existing homes fell 2.8 percent last month to a seasonally adjusted annual rate of 5.49 million. For all of 2016, sales posted an annual gain of 3.8 percent to 5.45 million.
But the housing market has become trapped by a supply shortage that has pushed prices higher and may limit the potential for additional sales growth. Homebuyers simply have fewer choices, as new construction has yet to meet demand and existing homeowners have been reluctant to list their properties for sale.
“Home buying is likely to face additional headwinds going forward, which include low inventory levels, rebounding prices and higher mortgage rates,” said Admir Kolaj, an analyst at TD Bank, who added that these factors are unlikely to “completely derail” the housing market.
Just 1.65 million homes were listed for sale in December. This marks a 6.3 percent drop from a year ago to the smallest total since 1999.
The tight supplies pushed the median sales price to $232,200 last month, up 4 percent from a year ago.
Homebuyers were able to manage the rising sales prices in part because of low mortgage rates in 2016, but those rates have climbed upward and settled above 4 percent since Donald Trump’s presidential victory. The financial markets expect that Trump will try to stimulate economic growth through deficit spending, which caused the rates to rise on the 10-year U.S. Treasury note and mortgages.
The Realtors estimate that rising mortgage rates in recent months increased the typical monthly payment by $75, or $900 a year.
It’s possible that rising mortgage rates are causing more people to buy homes earlier than they otherwise would in hopes of locking in lower monthly payments.
“When that activity dies down, we’re not sure where the next wave of buyers is coming from,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Mortgage buyer Freddie Mac said last week that the rate on 30-year fixed-rate loans averaged 4.09 percent from 4.12 percent. That was dramatically higher than a 30-year rate that averaged 3.65 percent for all of 2016, the lowest level recorded from records going back to 1971.
In December, sales fell in the Northeast, Midwest and West, while staying unchanged in the South, according to the Realtors.