The NAR reports existing home sales for December

Shutterstock.com

Article Highlights

  • Nearly half of all home purchase loans in December had a down payment of 5% or less.

    Tweet This

  • Loose lending combined with the Fed’s low interest rate policies are driving home prices up faster than fundamentals.

    Tweet This

  • While the NAR supports loose, unsustainable lending standards, working class home buyers would be better served by a “straight, broad highway to debt-free ownership.

    Tweet This

The National Association of Realtors (NAR) reported today that existing Home Sales for December came in at 4.87 million. The consensus was for sales of 4.94 million on seasonally adjusted annual rate (SAAR) basis. Sales in November were revised downward to 4.82 million SAAR. The inventory of homes for sale came in at 1.86 million, down 9.3% from November and represents a 4.6 month supply.

Sales for all of 2013 are at a healthy pace given sluggish job growth. It is the highest level since 2006 and near the 5.2 million average for 1998-2001. Sales are being helped by loose lending standards and interest rates still near their lowest level in decades.

For example, nearly half of all home purchase loans in December 2013 had a down payment of 5% or less and nearly a quarter of purchase loans had a debt-to-income ratio >43% – high by anyone’s measure. Loose lending combined with the Fed’s low interest rate policies are driving home prices up faster than fundamentals such as rents and consumer prices. Given the 4.6 month supply of homes for sale (down from 5.1 months in November), home prices can be expected to continue to outpace rents. This does not bode well for the middle class as government policies are once again driving an unsustainable increase in home prices.

While the NAR supports loose, unsustainable lending standards, working class home buyers would be better served by a “straight, broad highway to debt-free ownership” – the standard espoused and successfully implemented by FHA in 1935, but now long since abandoned.

Edward J. Pinto is a Codirector of AEI’s International Center on Housing Risk.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Edward J.
Pinto

What's new on AEI

Defeating ISIS: AEI experts weigh-in before the president’s address on Wednesday
image Degrading, defeating, and destroying the Islamic State
image Wealth Building Home Loan: Building wealth through homeownership and retirement savings
image The $3 iPhone
AEI on Facebook
Events Calendar
  • 15
    MON
  • 16
    TUE
  • 17
    WED
  • 18
    THU
  • 19
    FRI
Tuesday, September 16, 2014 | 5:00 p.m. – 6:00 p.m.
The Constitution as political theory

Please join us for the third-annual Walter Berns Constitution Day Lecture as James Ceasar, Harry F. Byrd Professor of Politics at the University of Virginia, explores some of the Constitution’s most significant contributions to political theory, focusing on themes that have been largely unexamined in current scholarship.

Event Registration is Closed
Wednesday, September 17, 2014 | 8:10 a.m. – Thursday, September 18, 2014 | 1:30 p.m.
Third international conference on housing risk: New risk measures and their applications

We invite you to join us for this year’s international conference on housing risk — cosponsored by the Collateral Risk Network and AEI International Center on Housing Risk — which will focus on new mortgage and collateral risk measures and their applications.

Event Registration is Closed
Thursday, September 18, 2014 | 2:15 p.m. – 3:00 p.m.
Speaker of the House John Boehner on resetting America’s economic foundation

Please join us as Speaker John Boehner (R-OH) delivers his five-point policy vision to reset America’s economy.

Friday, September 19, 2014 | 9:15 a.m. – 11:00 a.m.
Reforming Medicare: What does the public think?

Please join us as a panel of distinguished experts explore the implications of the report and the consumer role in shaping the future of Medicare.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.