Home Markets Sales of existing homes fell in December at the slowest rate since 2010

Sales of existing homes fell in December at the slowest rate since 2010

by SuperiorInvest

Homes in Rocklin, California, U.S., Tuesday, Dec. 6, 2022. A record number of homes are being sold as sellers face a sharp drop in demand, according to real estate brokerage Redfin.

David Paul Morris | Bloomberg | Getty Images

Sales of previously owned homes fell 1.5% in December from the previous month, according to the National Association of Realtors.

Sales ended the year at a seasonally adjusted, annualized pace of 4.02 million units, down 34% from December 2021. That’s the slowest pace since November 2010, when the nation was grappling with a housing crisis caused by faulty subprime mortgages.

Total sales for the year were down 17.8% from 2021.

Home sales have now fallen for 11 straight months due to much higher mortgage rates, which began rising last spring and more than doubled in the fall. Sky-high prices, driven by high demand during the early years of the pandemic, further eroded affordability and caused supply to plummet.

“December was another difficult month for buyers as they continue to struggle with tight inventory and high mortgage rates,” said Lawrence Yun, chief economist at Realtors. “However, expect sales to pick up again soon as mortgage rates have fallen significantly after peaking late last year.”

Mortgage rates have fallen a full percentage point since their peak in October last year, but are still roughly double what they were a year ago.

At the end of December, total housing inventory was down 13.4% from November to 970,000 units. However, compared to the previous December, it increased by 10.2%. Unsold inventory is at 2.9 months of inventory at the current sales pace, down from 3.3 months in November but up from 1.7 months in December 2021.

Low supply continues to support prices to some extent, but gains are shrinking from a year ago. The median price of an existing home sold in December was $366,900, up 2.3% from a year earlier. It’s still the highest price on record for December, but annual price gains were in the double digits last summer.

“Markets in about half of the country are likely to offer discounted prices to potential buyers compared to last year,” Yun added.

The problem, however, is that sellers are not entering the market due to falling prices and weaker demand. Overall inventory is higher than a year ago because homes have been on the market longer. New offers in January are down year-on-year.

“Evaporating demand has ended the strong seller’s market of the past few years, and the continued decline in home sales tells us that many buyers still can’t afford to buy or aren’t yet convinced the market is tilted enough in their favor to move forward.” “The housing market is entering ‘no man’s market’ territory as buyers and sellers remain largely at a standstill,” said Danielle Hale, Chief Economist at Realtor.com.

First-time buyers continue to struggle in today’s market, accounting for only 31% of December sales. While this is up from 30% last December, it is well below the historical standard of 40%.

The market continues to slow, with homes sitting on the market for an average of 26 days, up from 24 days in November and 19 days in December 2021.

Cash sales rose to 28% of transactions from 23% a year earlier, and investors accounted for 16% of sales, down slightly from 17% a year earlier.

While sales are down in all price categories, they are falling most significantly in higher categories. Sales of homes priced over $1 million fell 45% year-over-year, compared to sales of homes priced between $250,000 and $500,000, which were down 34%. Yun suggested that the weakness at the top end may be due to volatility in the stock market.

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