December Home Sales Drop 1% MoM; Lowest Level Since 2010 – National Association of Realtors Report 2023 Findings

Sales of Previously Owned Homes Decline in December

Sales of previously owned homes declined by 1% in December compared with November, reaching a seasonally adjusted annualized rate of 3.78 million units, according to the National Association of Realtors (NAR). This represents a 6.2% decrease compared to December 2022, marking the lowest level since August 2010.

Regional Sales Overview:

  • Northeast: Sales remained unchanged on a month-to-month basis.
  • Midwest: Sales declined by 4.3%.
  • South: Sales decreased by 2.8%.
  • West: Sales rebounded by 7.8%.

Furthermore, all regions experienced lower sales compared to the previous year. It is important to note that these sales numbers reflect contracts likely signed in late October and November when mortgage rates were significantly higher.

Mortgage Rates and Inventory Outlook

The average rate on a 30-year fixed loan increased to approximately 8% in October, before dropping to the 7% range in November. Currently, the rate stands at 6.89%, according to Mortgage News Daily.

Lawrence Yun, NAR’s chief economist, stated, “The latest month’s sales look to be the bottom before inevitably turning higher in the new year. Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”

Inventory and Home Prices

The inventory of homes for sale witnessed an 11.5% decrease from November to December but showed a 4.2% increase compared to December 2022. At the end of December, there were 1 million homes available, resulting in a 3.2-month supply at the current sales pace. A balanced market between buyers and sellers typically has a 6-month supply.

The limited supply of homes continues to drive up prices. In December, the median price of a home sold reached $382,600, reflecting a 4.4% increase compared to December 2022. This marks the sixth consecutive month of year-over-year price gains. The median price for the full year was at a record high of $389,800.

Market Trends and Investor Activity

In December, homes stayed on the market for an average of 29 days, up from 25 days in November. Additionally, all-cash sales accounted for 29% of total sales, up from 27% in November. The share of homes purchased by individual investors decreased to 16%, down from 18% in November.

A recent study from Realtor.com revealed that both higher home prices and financing costs resulted in fewer investor home purchases in 2023. This pullback in investor activity may benefit buyers, particularly first-time homebuyers, who are approaching the 2024 market with optimism despite the challenge of finding a home at a below-median price point.

Challenges for First-Time Buyers

First-time buyers continue to face difficulties, representing only 29% of December sales compared to 31% the previous year. Historically, first-time buyers make up 40% of the market.

“With rents continuing to ease and more multi-family homes entering the rental market, investors may proceed with caution in the housing market,” said Danielle Hale, chief economist at Realtor.com. “This reduction in investor competition provides an opportunity for potential first-time homebuyers who are seeking to purchase a home below the median price point often targeted by investors.”

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