Home Markets Home sales in December plummet and end the worst year since 1995

Home sales in December plummet and end the worst year since 1995

by SuperiorInvest

A delivery driver delivers packages in a Los Angeles neighborhood on January 17, 2024.

Federico J. Brown | AFP | fake images

Existing home sales fell 1% in December compared to November to 3.78 million units on a seasonally adjusted annualized basis, according to the National Association of Realtors. Sales were 6.2% lower than in December 2022, which is the lowest level since August 2010.

Full-year 2023 sales totaled 4.09 million units, the lowest since 1995.

Regionally, month-over-month, sales were flat in the Northeast and fell 4.3% in the Midwest. Sales fell 2.8% in the South, but recovered 7.8% in the West. Year over year, sales were lower in all regions.

The home closing count is based on contracts likely signed in late October and November, when mortgage rates were considerably higher than now. The average 30-year fixed loan rate rose to around 8% in October before falling to the 7% range in November. It is now at 6.89%, according to Mortgage News Daily.

“Sales in the past month appear to have bottomed out before inevitably rising in the new year,” Lawrence Yun, NAR’s chief economist, said in a statement. “Mortgage rates are significantly lower compared to just two months ago, and more inventory is expected to appear on the market in the coming months.”

Inventory fell 11.5% from November to December, but increased 4.2% from December 2022. There were 1 million homes for sale at the end of December, representing 3.2 months of supply at the rate of current sales. A six-month supply is considered balanced between buyer and seller.

The shortage of supply continues to overheat home prices. The median price of a home sold in December was $382,600, an increase of 4.4% from December 2022. This is the sixth consecutive month of year-over-year price increases. The average price for the entire year was $389,800, a record.

Homes stayed on the market longer in December, with an average of 29 days, compared to 25 days in November. The proportion of cash sales increased to 29% from 27% in November. Individual investors, who account for a large portion of cash sales, bought 16% of homes, up from 18% in November.

That decline in investor activity can be a positive point for buyers. Both higher home prices and higher financing costs resulted in fewer home purchases by investors throughout 2023, according to a recent Realtor.com study.

“As rents continue to decline and more multifamily housing enters the rental market, investors may continue to exercise more caution in the housing market,” said Danielle Hale, chief economist at Realtor.com. “This would mean one less source of competition for potential first-time homebuyers who are approaching the 2024 market with optimism despite the challenge of trying to purchase a home at a below-average price, a price at which investors “They also tend to aim.”

First-time buyers are still struggling, making up just 29% of December sales, down from 31% a year earlier. Historically they represent 40% of the market.

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