Sales of existing homes rose to an annual pace of 5.28 million in December, the highest level since May. Sales of existing homes rose 12.3 percent in December, which was well above expectations. Gains were broad based with increases in both single-family and condo sales. Distressed transactions, however, still account for a significant portion of total sales at 36 percent, which is an increase from 33 percent in November. Investors accounted for 20 percent of transactions. All-cash sales also remain elevated at 29 percent.

The oversupply of existing homes continues to be a substantial obstacle for the housing market. Single-family inventories fell 5.6 percent in December to a 3.02 million-unit pace. At the current rate of sales, it would take 7.8 months to clear the supply of homes. In the coming months, existing home sales should continue to increase modestly as private sector employment growth accelerates.

Source: US Dept of Commerce, FHFA, National Association of Realtors, Wells Fargo Securities