By Nicole Friedman 

Sales of previously owned homes rose in 2020 to the highest level since 2006, as ultralow interest rates and remote work during the pandemic increased homebuying demand.

Existing-home sales rose 0.7% in December from November to a seasonally adjusted annual rate of 6.76 million, the National Association of Realtors said Friday. The December sales marked a 22% increase from a year earlier.

Existing-home sales totaled 5.64 million in 2020, up 5.6% from 2019 and the highest level since the 2006 pace of 6.48 million, NAR said.

The Covid-19 pandemic transformed the housing market in 2020, as home sales plunged in the spring due to widespread shelter-in-place restrictions and then quickly rebounded in the summer and fall. In a bright spot for the U.S. economy, strong demand is expected to continue this year, spurring more home construction and sales of furniture and home goods.

"Homeowners are smiling, because they are seeing price increases," said Lawrence Yun, NAR's chief economist. "It's just lack of inventory that is holding back even greater home sales."

Economists surveyed by The Wall Street Journal expected a 2% monthly decline in sales of previously owned homes, which make up most of the housing market.

Economists say today's housing market is less risky than during the last boom in 2006. Mortgage lending standards are tighter, and the supply of homes on the market is lower relative to demand. Many homeowners facing financial difficulties can also take advantage of current policies allowing them to skip monthly payments and make them up later.

The housing market was poised for a strong year in early 2020, as interest rates fell and the large millennial generation continued to age into its prime homebuying years. Mortgage rates have continued to decline since then. For the week ended Thursday, the average rate on a 30-year fixed rate mortgage was 2.77%, down from 3.6% a year earlier, said Freddie Mac.

"The real important driver has been the record low level of mortgage rates...which really enhanced affordability for home buyers," said Frank Nothaft, chief economist at housing-data provider CoreLogic Inc.

While demand has climbed, sellers remain wary of listing their homes for sale, partly due to concerns about virus transmission, real-estate agents say.

There were 1.07 million homes for sale at the end of December, down 16.4% from November and down 23% from December 2019, according to NAR. At the current sales pace, there was a 1.9-month supply of homes on the market at the end of December, a record low.

In Charlotte, N.C., demand is robust from buyers moving from other states seeking a cheaper cost of living, said Wendy Dickinson of Coldwell Banker.

"The amount of homes that we have [on the market] is significantly down, " she said. "When houses hit the market here, it's very, very typical for them to go into multiple offers immediately."

The widespread shortage of homes for sale has prompted competition among buyers and pushed prices higher.

The median existing-home price rose 12.9% in December from a year earlier to $309,800, NAR said. For the year overall, the median price rose 9% to $296,500.

Brittany and Spencer McCreary, both 29 years old, bought their first home, a four-bedroom stone farmhouse, in York, Pa., in December after relocating from the Chicago suburbs in September. They had always planned to move back to York, where they grew up, but they made the move earlier than expected due to new flexibility to work remotely, Ms. McCreary said.

"I think it's totally because of the pandemic" that they moved this year, Ms. McCreary said. "We're glad we're not renting anymore. We always wanted to buy."

Existing-home sales rose the most month-over-month in the Northeast, at 4.5%, and in the South, at 1.1%.

Home sales were especially strong at the high end of the market, with the number of sales of homes priced at over $1 million up 94% in December compared with a year earlier, according to NAR.

Homes typically go under contract a month or two before the contract closes, so the December figures largely reflect purchase decisions made in November or October.

New-home sales have also climbed in recent months. Housing starts, a measure of U.S. home-building, rose 5.8% in December from November to the highest seasonally adjusted annual rate since 2006, the Commerce Department said Thursday.

News Corp, owner of The Wall Street Journal, also operates under license from the National Association of Realtors.

Write to Nicole Friedman at


(END) Dow Jones Newswires

January 22, 2021 10:40 ET (15:40 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.