If the price is right, any house will sell. But sellers don’t want to properly price their homes.
By Wolf Richter for WOLF STREET.
This is getting relentless: Sales of formerly owned homes, condos and coops fell 1.5% in December from November, the 11th straight month of month-on-month declines, and down 34% year-on-year. to a seasonally adjusted annual sales rate of 4.02 million homes, which is about the same as the lockdown low in May 2020 and beyond the lowest since the depth of Housing Bust 1 in 2010, the National Association of Realtors said today.
Almost any home will sell at the right price, but sellers don’t want to price their homes at the right price. And would-be sellers are sitting on their vacant homes hoping for a quick end to this downturn, or they’re listing it in the rental market, or trying to give it a try as a vacation rental rather than grappling with the reality of an overwhelming housing bubble that’s loudly burst ( historical data via YCharts):
Current sales in December — not the “seasonally adjusted annual rate” of sales — fell 36.3% year-on-year to 326,000 homes (down from 513,000 homes a year ago), according to the NAR.
The middle price All types of homes that closed sales in November fell for the sixth straight month to $366,900, down 11.3% from the June peak. That drop reduced annual gains to just 2.3%, from a 16% annual gain in early 2022.
Only part of this June-December price drop is seasonal: the average June-December drop over the six years before the pandemic was 5.8%, with a maximum drop of 6.4% and a minimum drop of 3.8% . This shows that the current drop of 11.3% far exceeds even the seasonal maximum drop.
Additional confirmation that much of this decline was not seasonal is provided by the rapidly shrinking year-on-year price gain from 16% in December 2021 to just 2.3% by spring 2022 (historical data via YCharts):
In some markets, the median price has fallen much further. In the San Francisco Bay Area, for example, the median price is down 30% and 10% year over year since peaking in April 2022, according to the California Association of Realtors. But other markets are lagging behind to make up the overall national average.
All-cash buyers, investors and second home buyers withdrew massively. Cash sales were down 22% year over year to 92,000 homes (28% of 328,000 homes sold) compared to 118,000 in December 2021 (23% of 513,000 homes sold). In other words, cash buyers didn’t want to buy these overpriced homes either, even though they didn’t have to worry about a large mortgage.
Sales to retail investors or second home buyers fell by 27% to 52,500 homes (16% of 328,000 homes sold) compared to 71,800 in December 2021 (14% of 513,000 homes sold). They also withdrew from this market.
Sale of single-family houses fell 1.1% in December from November and 33.5% year-on-year to a seasonally adjusted annualized rate of 3.64 million homes.
Sale of condominiums and cooperatives fell 4.5% in December from November and 38.2% year-on-year to a seasonally adjusted annualized rate of 420,000 units.
Sales collapsed in all regions, but crashed most to the west. Year-on-year percentage change (NAR map of regions):
Active Entries up 55% year-on-year to 68,900 in December (active listings = total inventory for sale minus properties pending sales). With the holiday season approaching, many sellers pull their homes from the market and then put them back on the market for the spring selling season. This happens every year; Active listing begins to fall before Thanksgiving and only increases again in the spring (data from realtor.com):
Active listings, while up tremendously year-on-year, are still relatively low as potential sellers are determined to wait and see what they expect to be a short wave in the market, and in the meantime they are putting their vacant homes on the rental market and they are trying to make some money by offering their vacant house as a holiday home. And many are just sitting on their vacant homes that they haven’t sold because they want to ride the market to the top with huge returns of 20% or 30% a year. But this show is over. And what now?
Average days on the marketbefore the frustrated seller pulls the house off the market or before the house is sold rose to 67 days (data from realtor.com):
Discounts: Active offers with discounts in realtor.com data hit new highs for every December since 2016: 25% of active offers in December 2022 had discounts, up from 17% in December 2019 before the pandemic, for example.
December or January is usually the seasonal low point for discounts. Instead of lowering prices, many sellers are pulling their homes off the market and waiting for the spring selling season before listing them again. The fact that sellers are cutting prices by this amount over the holiday shows that they are getting a bit more aggressive.
Hoping for a quick reversal of this downturn: This combination of declining sales, declining prices, increasing active listings, increasing days on the market before the home is moved or sold, an increase in active listings with price reductions but still tight supply, suggests that many potential sellers are still hope for a quick reversal of this downturn. And they abandon the vacant house to wait for better days, or they put it on the rental market, or try to use it as a vacation rental, rather than confronting the reality of an overwhelming apartment bubble that has loudly burst.
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