Home sales dropped last month, but not because demand was lacking. There are fewer homes for sale than at any time in the last 11 years.

According to the National Association of REALTORS®, Existing Home Sales for December 2012 fell to a seasonally-adjusted, annualized rate of 4.94 million homes from November’s tally of 4.99 million existing homes.

The Existing Home Sales report is based on the number of closings for previously-owned, single-family homes, townhomes, condominiums and co-ops. It’s estimated that existing homes account for 85 to 90 percent of all home sales nationwide.

2012 was a good year for housing. Sales of existing homes climbed 12.8 percent as compared to the December 2011 tally, which may be a strong indicator of future mortgage originations and short-term demand for home-related goods.

Based on preliminary sales figures, the number of home resales in 2012 grew 9.2 percent to 4.65 million homes as compared to 4.26 million homes sold during 2011. This marks the highest number of home resales sold in 5 years — a time which predates the recession of last decade.

In addition, the median price of a homes resale read $180,800 in December, which is a 11.5 percent increase as compared to December 2011, and the tenth consecutive month of year-over-year median price growth.

Not since November 2005 has the median home resale price climbed this quickly

Furthermore, the supply of existing homes fell to 4.4 months in December, down 0.4 months from November. At the current pace of sales, the national home resale inventory will be sold by June. This is an important statistic because home supply of less than 6.0-months is thought to represent a “seller’s market”.

There are also just 1.82 million existing homes for sale nationwide — the fewest since January 2001, and a 22 percent reduction from one year ago. With buyer demand high and home inventory down, home prices are likely to rise in Fremont and nationwide throughout 2013.

After a small decline in September, Existing Home Sales rebounded in October, increasing a modest 2.1%.

The housing market’s slow, steady recovery continues as sales volume in all four regions expanded last month with the exception of the Hurricane Sandy-affected Northeast.

The National Association of REALTORS® monthly Existing Home Sales Report comprises completed sales of single-family homes, townhomes, condominiums, and co-ops. The Existing Home Sales report is compiled on a seasonally-adjusted, annualized basis. It shows a 10.9 percent sales increase as compared last year.

Sales volume might otherwise be higher, however, if not for a lack of homes for sale.

Total housing inventory fell 1.4 percent to 2.14 million homes last month which, at the current sales pace, represents a 5.4-month national supply — the lowest in more than 6 years.

The lack of supply amid burgeoning demand has led home prices higher nationwide. October’s median existing home sale price was $178,600 — an 11.1% increase from October 2011 and the eighth consecutive month during which the median sales price rose.

The last time that occurred was during the eight months ending May 2006.

In addition, the Existing Home Sales report showed that the median time on market in October rose to 71 days, up 1 day from September 2012. As compared to October 2011, however, median time on market is down 26% from 96 days.

Other noteworthy statistics from the October Existing Home Sales report include : 

• Foreclosures and short sales accounted for 24% of sales
• Foreclosures sold for an average discount of 20% to market
• Short sales sold for an average discount of 14% to market

Furthermore, thirty-two percent of homes sold in October were on the market for less than one month. 20% were on the market for six months or longer.

Record-low mortgage interest rates continue to spur housing, as do low prices. Neither will last indefinitely. If you plan to purchase a home in Chicago in 2013, therefore, consider moving up your time frame. Home ownership will likely increase in cost as the year moves on.