Homes in Rocklin, California, U.S., Tuesday, Dec. 6, 2022. A record number of homes are being delisted as sellers face a sharp drop in demand, according to real estate broker Redfin.
David Paul Morris | Bloomberg | Getty Images
Used home sales fell 1.5% in December from the previous month, according to the National Association of Realtors.
Sales ended the year at a seasonally adjusted and annualized pace of 4.02 million units, down 34% from December 2021. This is the slowest pace since November 2010, when the country crossed a housing crisis caused by bad subprime mortgages.
Total sales for the year decreased by 17.8% compared to 2021.
Home sales have now fallen for 11 straight months, due to much higher mortgage rates, which started to rise last spring and had more than doubled by the fall. Skyrocketing prices, driven by high demand in the early years of the pandemic, further weakened affordability and led to a sharp drop in supply.
“December was another tough month for buyers, who continue to struggle with limited inventory and high mortgage rates,” said Lawrence Yun, chief economist for real estate agents. “However, expect sales to pick up soon as mortgage rates have come down sharply after peaking late last year.”
Mortgage rates have fallen one 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 fell by 13.4% compared to November to stand at 970,000 units. However, it was up 10.2% from the previous December. Unsold inventory is at a 2.9 month supply at the current selling rate, down from 3.3 months in November but up from 1.7 months in December 2021.
Weak supply continues to support prices to some extent, but gains are diminishing from a year ago. The median price of an existing home sold in December was $366,900, up 2.3% from a year earlier. This is still the highest price on record in December, but annual price increases were double digits last summer.
“Markets in about half of the country are likely to offer potential buyers discounted prices compared to last year,” Yun added.
The problem, however, is that sellers are not entering the market, given falling prices and weak demand. Total inventory is higher than a year ago because homes have been on the market longer. New listings in January are down year over year.
“The evaporation of demand has ended the strong sellers’ market of the past few years, and the continued decline in home sales tells us that many buyers are still unable to afford a purchase or are not yet confident that the market is tilted enough in their favor to move forward. The housing market is entering ‘nobody’s market’ territory as buyers and sellers remain largely at an impasse,” said Danielle Hale, chief economist for Realtor.com.
First-time buyers continue to struggle in the current market, accounting for just 31% of December sales. Although this figure is up from 30% in December last year, it is far from the historical norm of 40%.
The market continues to slow, with homes remaining on the market an average of 26 days, compared to 24 days in November and 19 days in December 2021.
Cash sales reached 28% of transactions compared to 23% the previous year and investors accounted for 16% of sales, down slightly from 17% the previous year.
While sales are down in all price categories, they are falling most sharply at the high end. Sales of homes priced over $1 million are down 45% year over year, compared to sales of homes priced between $250,000 and $500,000, which are down by 34%. Yun suggested that the weakness in the high end could be due to stock market volatility.