Home in Rocklin, California, US on Tuesday, December 6, 2022. According to real estate brokerage Redfin, a record number of homes are being delisted due to a sharp drop in demand from sellers.
David Paul Morris | Bloomberg | Getty Images
According to the National Association of Realtors, sales of previously owned homes fell 1.5% in December from the previous month.
Sales ended the year at a seasonally adjusted, annual pace of 4.02 million units, down 34% compared to December 2021.
Total sales for the year were down 17.8% from 2021.
Home sales have now fallen for 11 months in a row, thanks to a significant increase in mortgage rates, which began rising last spring and more than doubled by the fall. Sky-high prices driven by high demand during the first years of the pandemic only further eroded affordability and led to a sharp drop in supply.
“December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates,” said Lawrence Yoon, chief economist at Realtors. “However, there is hope that sales will pick up again soon as mortgage rates have declined markedly since peaking at the end of last year.”
Mortgage rates have declined a full percentage point since their highs last October, but they are still roughly double what they were a year ago.
At the end of December, total housing inventory fell 13.4% from November to 970,000 units. However, it was up 10.2% from last December. Unsold inventory is at 2.9 months of supply at the current sales pace, down from 3.3 months in November but up from 1.7 months in December 2021.
Lower supplies are supporting prices to some extent, but the gains are narrowing compared to a year ago. The median price for homes sold and existing in December was $366,900, up 2.3% from a year ago. This is still the highest price ever recorded for December, but last summer the annual price gain had been in double digits.
“About half of the country is likely to offer discounted prices to potential buyers compared to last year,” Yun said.
However, the problem is that sellers are not entering the market in view of falling prices and weak demand. Total inventory is higher than a year ago because homes have been sitting on the market longer. New listings in January have been going down year over year.
“Evaporator demand has ended the strong seller’s market of the past several years, and home sales still falling tell us that many buyers are still not able to make a purchase or are not yet convinced that the market is ready to move.” The housing market is entering “nobody’s market” territory as buyers and sellers remain largely at loggerheads,” said Daniel Hale, chief economist at Realtor.com.
First-time buyers continue to struggle in today’s market, making up just 31% of December sales. While this is up from 30% in December of last year, it is a far cry from the historical norm of 40%.
The market slump continues, with homes holding an average of 26 days, up from 24 days in November and 19 days in December 2021.
All-cash sales rose to 28% from 23% a year ago, and investors made up 16% of sales, down slightly from 17% the year before.
While sales are down across all price ranges, they are falling fastest at the high end. Sales of homes priced over one million dollars were down 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 higher levels could be due to volatility in the stock market.