Existing home sales eroded again in December, dropping 1.0% from November to a seasonally adjusted annual rate of 3.78 million units and marking the eighth month in 2023 with a resale decline.
That’s according to the latest report from the National Association of Realtors (NAR), which also noted that December sales fell 6.2% year over year. December’s annualized sales pace was a low for the current cycle and also the weakest resale rate since August 2010. Full-year figures were likewise bleak, with 4.09 million resales recorded, the lowest total since 1995.
December’s slip was unexpected given the recent slide of mortgage rates, which had decreased by more than a percentage point since October, and November’s existing home sales gain that snapped a streak of five monthly retreats. A Reuters poll of economists had predicted resales to stay level from November to December.
In one respect, the surprise backtrack served as a reminder that rates alone don’t dictate sales, especially given the ongoing paucity of listings that has kept home prices buoyant. The median price of existing homes in December was up 4.4% annually to $382,600, the sixth straight month with a yearly increase. For the entire year, the median price grew to $389,800, a record high.
Lawrence Yun, chief economist at the NAR, was optimistic about the months ahead despite December’s diminished activity.
“The latest month’s sales look to be the bottom before inevitably turning higher in the new year,” Yun said. “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”
Total housing inventory was at 1 million units at the end of December, down 11.5% from November but still up 4.2% annually. At the current sales pace, unsold inventory is at a supply of 3.2 months, down from 3.5 month over month but up from 2.9 year over year.
Yun extolled the need for further inventory stabilization as crucial for the market to achieve course-correction.
“Obviously, the recent, rapid three-year rise in home prices is unsustainable,” he said. “If price increases continue at the current pace, the country could accelerate into haves and have-nots. Creating a path towards homeownership for today’s renters is essential. It requires economic and income growth and, most importantly, a steady buildup of home construction.”
