Home sales down again, but may ‘pick up soon’
Existing home sales dipped 1.5% in December, defying predictions for a bigger fall, according to the National Association of Realtors.
- Year-over-year, existing home sales fell 34%, down from 6.09 million in December 2021.
- But median home sales prices continued to climb. Prices were up by 2.3% to $366,900 over the previous year.
- NAR chief economist Lawrence Yun said he expects sales to pick up in the near future as mortgage rates moderate.
Home sales dipped for the 11th straight month in December, the National Association of Realtors reported Friday. But the decline was less than economists predicted, with NAR's chief economist saying a rebound should happen soon.
Existing home sales fell by 1.5%, marking "another difficult month for buyers," said NAR chief economist Lawrence Yun, who cited higher mortgage rates and a persistently low housing supply as the primary factors.
Total home sales for 2022 were just above five million, down nearly 18% from 2021.
But Yun expressed optimism that the industry is about to see the start of a turnaround. "Expect sales to pick up again soon since mortgage rates have markedly declined after peaking late last year."
Realtor.com chief economist Danielle Hale echoed Yun's comments and said that "the stalemate won't last forever."
"Buyer sentiment improved slightly in December as rates eased from a peak of nearly 7.1% early in November to roughly 6.3% by the end of the year. As inflation shows signs of declining, mortgage rates could move even lower," Hale said.
Sales brighter than economic forecasts
As a silver lining, the month-over-month decline was only about half as steep as many economists had predicted. But still unknown is how the Federal Reserve will respond to inflation at its Jan. 31-Feb. 1 meeting. The Fed is expected to raise interest rates but at a slower pace to bring down inflation, which was at 6.5% in December.
Even a slight increase could trigger another rise in mortgage lending costs. The average 30-year mortgage rate fell this week to its lowest rate since September to 6.15%.
"Home prices nationwide are still positive, though mildly," Yun added. "Markets in roughly half of the country are likely to offer potential buyers discounted prices compared to last year."
Inventory still lagging
Inventory dropped in December to a 2.9-month supply of unsold homes nationwide, down from 3.3 months in November. A balanced market would typically have between four and six months of supply.
"It's possible the inventory picture will improve in the coming weeks, but this is still an unusual housing market," said Lisa Sturtevant, chief economist at Bright MLS. "In a typical spring market, sellers lead buyers, with new listings coming on the market in the early part of the year before buyers start thinking about shopping. This year, buyers may be out in front of supply, and the market could be surprisingly competitive," she said.
Nearly one-third of purchases in December were made by first-time home buyers, up from 28% in November. Cash buyers represented 28% of sales for the month. Yun noted that cash buyers, who are unaffected by changes in mortgage rates, are taking advantage of bargains in some areas of the country.
More than half the homes sold in December were on the market for less than a month. NAR reported that homes stayed on the market for 26 days in December, up from 24 days in November and 19 days in December 2021.
Home sales by U.S. region
Three of the four major U.S. regions had monthly sales declines, with the West holding steady, NAR reported. But every U.S. region was off from 2021.
The following is a breakdown by region of home sales in December:
Northeast: Home sales dipped 1.9% over November for an annual rate of 520,000. The median price was $391,400, up 1.6%.
Midwest: Sales were off by just 1% to an annual rate of 1.01 million in December. The median price was $262,000, up 2.9%.
South: Home sales were down by 2.2% to an annual rate of 1.80 million. The median price was $337,900, up 3.5%.
West: Sales were largely unchanged over the previous month. The median price was $557,900, an increase of $200 from December 2021.