(CN) – Existing-home sales stumbled in most of the country in December, but 2017 as a whole edged up 1.1 percent and 2017 ended as the best year for sales in 11 years, the National Association of Realtors said Wednesday.
Meanwhile home values in hot markets, like San Jose, California, continued to see robust gains.
The number of existing homes sold in December fell 3.6 percent compared to the previous month, but despite that setback, sales for the year totaled 5.51 million units — the best showing, by a hair (1.1 percent), since 2006.
Sales in December fell in the Northeast, Midwest, South and West.
Lawrence Yun, the chief economist for the association, said the housing market performed remarkably well for the U.S. economy in 2017, with substantial wealth gains for homeowners and historically low distressed property sales.
“Existing sales concluded the year on a softer note, but they were guided higher these last 12 months by a multi-year streak of exceptional job growth, which ignited buyer demand,” Yun said. “At the same time, market conditions were far from perfect. New listings struggled to keep up with what was sold very quickly, and buying became less affordable in a large swath of the country. These two factors ultimately muted what should have been a stronger sales pace.”
He added: “Closings scaled back in most areas last month for this same reason. Affordability pressures persisted, and the pool of interested buyers at the end of the year significantly outweighed what was available for sale.”
Just 1.48 million homes were listed for sale at the end of December, a 10.3 percent drop over the past year.
And there’s widespread belief that the downturn of homes for sale as 2017 ended has set up a surge in remodeling this year.
According to a recent analysis by the Joint Center for Housing Studies at Harvard University, homeowner will likely spend close to $340 billion on home improvements and repairs in 2018, an increase of 7.5 percent from estimated 2017 spending.
“Steady gains in the broader economy, and in home sales and prices, are supporting growing demand for home improvements,” says Chris Herbert, Managing Director of the Joint Center for Housing Studies. “We expect the remodeling market will also get a boost this year from ongoing restoration efforts in many areas of the country impacted by last year’s record-setting natural disasters.”
Abbe Will, a research associate in the remodeling futures program at the Joint Center, said despite continuing challenges of low for-sale housing inventories and contractor labor availability, 2018 could post the strongest gains for home remodeling in more than a decade.
“Annual growth rates have not exceeded 6.8 percent since early 2007, before the Great Recession hit,” Will said.
Home values are climbing faster than wages because of the dearth of available properties. The median home sales price increased 5.8 percent from a year ago to $246,800 in December, a pace more than double gains in average hourly earnings.
Roughly 24 percent of homes last year sold for more than their advertised price, with buyers of those properties on average paying $7,000 above asking, according to the real estate firm Zillow. Those figures have crept upward since 2012.
In an analysis released earlier this month, Zillow said 52.6 percent of all homes nationwide are worth as much or more than they were at the peak of the national housing boom in April 2007.
Some markets, though, have proven hotter than others – kept at a boil by healthy income growth, abundant job opportunities and above-average housing appreciation.
It’s largely those markets that will continue to be hot in 2018. San Jose, Calif., tops the list of hottest markets for 2018. Home values in the Silicon Valley hub gained 17.4 percent over the past year – the fastest growth among the 50 largest metro areas – and it tops Zillow’s list of hot markets for 2018, as high-paying tech jobs continue to keep pace with climbing housing costs.
San Jose’s median home value of $1.13 million is expected to grow by 8.9 percent this year, while its population and labor market remain robust. Glassdoor estimates that San Jose has 0.036 job openings per person – the highest rate among large U.S. metros. It’s also the only market with a median household income above $100,000 – at $110,040.
Zillow ranks two increasingly hot North Carolina markets – Raleigh and Charlotte – second and fourth on its list for 2018. Both areas boast strong income and population growth, as fast-growing Research Triangle anchor Raleigh becomes better known for innovations outside its life sciences base and Bank of America headquarters Charlotte builds on its reputation as a financial center.
Tech hubs Seattle and San Francisco round out the top five at No. 3 and No. 5, respectively.
The top 10 also includes Nashville, Denver and Austin – which have the lowest unemployment rates among large metros, even as Austin’s population grows faster than other major metros (at 2.8 percent between 2015 and 2016).
Housing markets that will continue to face challenges in 2018 include former industrial giants Cleveland, Buffalo, N.Y. and Milwaukee. The population of all three metros is falling, and unemployment in Cleveland is 6.2 percent, well above the historically low national rate of 4.1 percent.
Zillow also anticipates cooler fortunes for housing in Hartford, Conn., where the median home value is expected to gain 1.2 percent this year – in an area where only 5.7 percent of homes are at or above their housing bubble peak.