Homes in Rocklin, California, U.S., on Tuesday, December 6, 2022. A record number of homes are being pulled from the listing as sellers face a sharp drop in demand, according to real estate agent Redfin.
David Paul Morris | Bloomberg | Getty Images
December home sales were down 1.5% 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. It’s the slowest pace since November 2010, when the nation was struggling through a housing crisis ravaged by flawed subprime mortgage was caused.
Total sales for the year were down 17.8% from 2021.
Home sales have now been falling for 11 straight months, on the back of much higher mortgage rates, which started rising last spring and had more than doubled by the fall. Sky-high prices, fueled by high demand in the early years of the pandemic, further weakened affordability and caused supply to fall sharply.
“December was another difficult month for buyers who continue to face limited inventory and high mortgage rates,” said Lawrence Yun, Realtors’ chief economist. “But expect sales to pick up again soon as mortgage rates have fallen significantly after peaking late last year.”
Mortgage rates are down a full percentage point from their peak last October, but they’re still about double what they were a year ago.
At the end of December, the total housing stock fell by 13.4% compared to November to 970,000 units. However, it rose by 10.2% compared to the previous December. Unsold inventory at the current selling pace has 2.9 months supply, down 3.3 months in November but up 1.7 months in December 2021.
Low supply continues to support prices to some extent, but profits are shrinking compared to a year ago. The median price of an existing home sold in December was $366,900, up 2.3% year-on-year. It’s still the highest price recorded in December, but annual price gains were double digits last summer.
“Markets in about half of the country are likely offering potential buyers reduced prices compared to last year,” Yun added.
The problem, however, is that sellers are not entering the market in the face of falling prices and weaker demand. The total inventory is higher than a year ago because houses are on the market longer. New registrations in January are down year-on-year.
“Slacking demand has ended the strong seller’s market of recent years, and still declining home sales tell us that many buyers still cannot afford to buy, or are not yet convinced the market has tilted in their favor enough to move.” The housing market is entering “no man’s market” territory as buyers and sellers largely remain in a standoff,” said Danielle Hale, chief economist at Realtor.com.
First-time buyers continue to struggle in today’s market, accounting for just 31% of December sales. While that’s up from 30% in December last year, it’s a far cry from the historical norm of 40%.
The market continues to slow, with homes staying on the market for an average of 26 days, up from 24 days in November and 19 days in December 2021.
Cash sales increased to 28% of transactions from 23% a year ago, and investors accounted for 16% of sales, down slightly from 17% a year ago.
While sales are down across all price points, they’re falling the most at the top end. 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 could be due to volatility in the stock market.