Sales of second-hand homes in the US fell in December by 1.5% compared to the previous month, according to data from the National Association of Realtors.
Sales ended the year at 4.02 million units, down 34% from December 2021. That’s the slowest pace since November 2010, when the country struggled with a housing crisis caused by faulty subprime mortgages. Total sales for the year decreased by 17.8% compared to 2021.
Home sales have fallen for 11 straight months, due to much higher mortgage interest rates, which began rising last spring and more than doubled in the fall. Skyrocketing prices, which were affected by high demand during the first years of the corona epidemic, further increased the difficulty of purchasing an apartment and caused a sharp decrease in supply. “December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates,” said Lawrence Yun, chief economist for the Association of Realtors. “However, expect sales to pick up again soon as mortgage rates have fallen sharply after peaking at the end of last year.” Mortgage rates have fallen a full percentage point since their peak last October, but are still roughly double what they were a year ago.
At the end of December, the total housing stock decreased by 13.4% from November to 970,000 units. Low supply continues to support prices to some extent, but the increases are reduced compared to a year ago. The median price of a second-hand home sold in December was $366,900, up 2.3% from the previous year. That’s still the highest price on record for December, but annual price increases were in the double digits last summer. “Markets in about half of the country are expected to offer potential buyers discounted prices compared to last year,” Yoon added.
However, the problem is that the sellers are not entering the market, given the drop in prices and drop in demand. Total inventory is higher than a year ago because homes have been on the market longer. New records in January also show a year-over-year decline. “Evaporating demand has ended the strong seller’s market of recent years, and home sales that are still falling tell us that many buyers are still unable to afford a purchase or are not yet convinced that the market is tilted enough in their favor to move forward. The housing market is entering ‘no man’s’ territory as buyers and sellers remain They’re mostly at a standstill,” said Danielle Hale, chief economist for Realtor.com.
New home buyers continue to struggle in today’s market, accounting for only 31% of sales in December. While this is an increase from 30% in December last year, it is far from the historical norm of 40%. The market continues to slow, with homes being offered for sale for an average of 26 days, compared to 24 days in November and 19 days in December 2021. Cash sales rose to 28% of transactions from 23% the previous year, and investors accounted for 16% of sales, down slightly from 17% the previous year.
While sales are down in all categories, they are down most sharply in the most expensive homes. 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 fell 34%. Yoon suggested that weakness in the sale of expensive homes may be due to volatility in the stock market.
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