U.S. existing home sales retreated in December after rising the previous month, closing out the worst year for the housing market in nearly three decades.
Sales of previously owned homes tumbled 1% in December from the previous month to an annual rate of 3.78 million units, according to new data released Friday by the National Association of Realtors (NAR). It marked the slowest pace of sales since August 2010.
On an annual basis, existing home sales fell to the lowest level since 1995.
“The latest month’s sales look to be the bottom before inevitably turning higher in the new year,” said Lawrence Yun, NAR’s chief economist. “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”
HOME FORECLOSURES ARE ON THE UPSWING NATIONWIDE
There were about 1 million homes for sale at the end of December, according to the report, down 11.5% from the previous month but up 4.2% from the same time one year ago.
The decline in inventory helped to drive prices higher last month. The median price of an existing home sold in December hit $389,800 – a record high.
“Despite sluggish home sales, 85 million home-owning households enjoyed further gains in housing wealth,” Yun said. “Obviously, the recent, rapid three-year rise in home prices is unsustainable. If price increases continue at the current pace, the country could accelerate into haves and have-nots.”
MORTGAGE CALCULATOR: SEE HOW MUCH HIGHER RATES COULD COST YOU
Homes sold on average in just 29 days last month. That is up from the 25 days recorded in November and 26 days in December 2022. Before the COVID-19 pandemic, homes typically sat on the market for about a month before being sold.
At the current pace of sales, it would take roughly 3.2 months to exhaust the inventory of existing homes. Experts view a pace of six to seven months as a healthy level.
The supply crunch is largely being driven by the astronomical rise in mortgage rates over the past year. Sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell with rates so high, leaving few options for eager would-be buyers.
However, borrowing costs have retreated over the past month as many investors believe the Federal Reserve is done with its aggressive interest-rate hike campaign.
Rates on the popular 30-year fixed mortgage are currently hovering around 6.6%, according to Freddie Mac, down from a high of 7.79% at the end of October but well above the pre-pandemic average of 3.9%.
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