Despite a poor showing in December, existing home sales in 2017 were the best levels in 11 years.  The National Association of Realtors® (NAR) said the finished with 5.51 million sales of existing single-family homes, townhomes, condos, and cooperative apartments. This edged out, by 1.1 percent, the 5.45 million sales in 2016 to have the highest number of transaction since 6.48 million were sold in 2006.  

In December, however home sales declined by 3.6 percent to a seasonally adjusted annual rate of 5.57 million and were 1.1 percent higher on an annual basis.  November sales were revised down from 5.81 million to 5.78 million.  

Many analysts had expected a decline in December, although not one so large.  Estimates from those polled by Econoday ranged from 5.50 million to 5.90 million units, with a consensus of 5.75 million.

Single-family home sales dropped by 2.6 percent to a seasonally adjusted annual rate of 4.96 million from 5.09 million in November but remain above the 4.91 million pace of a year ago. Existing condominium and co-op sales fell 11.6 percent to a seasonally adjusted annual rate of 610,000 units in December and are up 1.7 percent on an annual basis.

Lawrence Yun, NAR chief economist, says the housing market performed remarkably well for the U.S. economy in 2017, but wasn't as good as it might have been.  The year brought 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," he 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."

Added Yun, "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."

The median existing-home price for all housing types in December was $246,800, a 5.8 percent rate of appreciation for the year and was the 70^th straight month of year-over-year gains.  Last December the median price was $233,300.  The median existing single-family home price also rose 5.8 percent year-over-year to 248,100. Condos performed even better with a 6.4 percent annual increase to a median of $236,500.

The inventory of available homes fell another 11.4 percent in December to 1.48 million, and is now 10.3 percent lower than a year ago (1.65 million).  The inventory has declined year-over-year for 31 consecutive months and is currently estimated at a 3.2-month supply, the lowest level since NAR began tracking in 1999.

"The lack of supply over the past year has been eye-opening and is why, even with strong job creation pushing wages higher, home price gains - at 5.8 percent nationally in 2017 - doubled the pace of income growth and were even swifter in several markets," said Yun.

The share of first-time buyers increased from 29 percent in November to 32 percent, unchanged from a year ago.  Individual investors had a 16 percent share of sales, up from 14 percent both last month and in December 2016.  All cash sales accounted for 20 percent of transactions in December and averaged 21 percent for the year.

"Rising wages and the expanding economy should lay the foundation for 2018 being the turning point towards an uptick in sales to first-time buyers," said Yun. "However, if inventory conditions fail to improve, higher mortgage rates and prices will further eat into affordability and prevent many renters from becoming homeowners."

Properties typically stayed on the market for 40 days, the same as in November, but 12 days shorter than in December 2016.  Forty-four percent of homes sold in December went under agreement in less than a month.

Distressed sales - foreclosures and short sales - made up 5 percent of sales in December compared to 4 percent in November. Four percent of sales were foreclosures and 1 percent were short sales.

NAR President Elizabeth Mendenhall, says improving the new tax law is a top priority for Realtors® in 2018. "Especially in high-cost, high-taxed markets, there's still big concern that the overall structure of the final bill diminishes the tax benefits of homeownership in a way that would adversely affect home values and sales over time," she said. "As the housing market adjusts to the new law, Realtors® will be listening to their clients and communicating to lawmakers ways to ensure owning a home is truly incentivized in the tax code."

The slide in sales affected all four of the nation's regions.  Sales were down 7.5 percent in the Northeast to an annual rate of 740,000, 2.6 percent below a year ago. The median price in the region was $261,400, 3.0 percent higher than in December 2016.

In the Midwest, existing-home sales dipped 6.3 percent to a rate of 1.33 million, remaining 1.5 percent above a year ago. The median price rose 7.8 percent to $191,400.

Sales in the South decreased 1.7 percent to an annual rate of 2.30 million, an annual gain of 3.1 percent. The median price increased by 5.8 percent to $221,200.

There was a 1.6 percent decline in sales in the West, to 1.20 million units, 0.8 percent fewer than in December 2016.  The median price in the West was $367,400, up 7.3 percent from December 2016.