US home sales tumbled 3.6 percent in December

U.S. home sales slid 3.6 percent in December, as rising prices and a declining number of available properties stifled purchases.

The National Association of Realtors said Wednesday that sales of existing homes fell last month to a seasonally adjusted annual rate of 5.57 million units. Despite the monthly setback, sales totaled 5.51 million in 2017. That was the highest level since 2006, yet it marked a slight 1.1 percent gain from 2016 as the months' supply of properties on the market fell to the lowest level ever recorded by the Realtors.

The strengthening U.S. economy helped to lift home sales last year, but homeowners are choosing not to list their properties despite the rising prices and relatively low mortgage rates. The lack of homes for sale speaks to the lingering aftershocks from the 2007 housing crisis. After a wave of mortgage defaults and foreclosures, investors bought many properties and turned them into rentals. Meanwhile, homeowners are choosing to build equity rather than upgrade to another house.

David Berson, chief economist at Nationwide Insurance, said sales should increase modestly in 2018, but they'll be "held back by a lack of inventory."

Just 1.48 million homes were listed for sale at the end of December, a 10.3 percent drop over the past year. There were just 3.2 months' supply of homes on the market, the lowest level since the Realtors began tracking the figure in 1999.

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.

Sales in December fell in the Northeast, Midwest, South and West.

The shortage of homes for sale appears to be setting up a surge in remodeling.

Homeowners are expected to spend nearly $340 billion this year on improvements and repairs, a 7.5 percent increase from 2017, according to a recent analysis by the Joint Center for Housing Studies at Harvard University.

This would be the steepest increase in renovation activity in more than a decade.

Because buyers have limited choices, they're increasingly willing to pay above the asking price.

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.

The problem is at its worst in the most expensive markets. Nearly half of homes around San Jose, California — the epicenter of U.S. software companies — sold for above asking with the average premium of $62,000.