- Existing home sales fall 1.5% in December
- Revenue falls 17.8% in 2022, the sharpest annual decline since 2008
- The median house price increases by 2.3% compared to the previous year
WASHINGTON, Jan 20 (Portal) – US existing home sales plummeted to a 12-year low in December, but falling mortgage rates prompted cautious optimism that the competitive housing market may be close to finding a bottom.
Friday’s National Association of Realtors report also showed that the median home price has risen at the slowest pace since the start of the COVID-19 pandemic as sellers resorted to rebates in some parts of the country.
The Federal Reserve’s fastest rate hike cycle since the 1980s has plunged housing construction into recession.
“Existing home sales are lagging a bit,” said Conrad DeQuadros, principal economic adviser at Brean Capital in New York. “The drop in mortgage rates could help support housing activity in the coming months.”
Existing home sales, which are counted at contract time, fell 1.5% last month to a seasonally adjusted annual rate of 4.02 million units, the lowest level since November 2010. That marked the 11th consecutive monthly decline in sales, the longest of its kind since 1999.
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Sales fell in the Northeast, South, and Midwest. They were unchanged in the West. Economists polled by Portal had forecast home sales to fall to 3.96 million units. December data likely reflects contracts signed about two months earlier.
Home resale, which accounts for a large portion of US home sales, plunged 34.0% year over year in December. They fell 17.8% to 5.03 million units in 2022, the lowest annual total since 2014 and the sharpest annual decline since 2008.
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The continued sales slump, which meant fewer agent commissions, was the latest indication that home investment likely contracted in the fourth quarter, the seventh straight quarterly decline.
This would be the longest streak of its kind since the housing bubble collapse that triggered the Great Recession.
While a survey by the National Association of Home Builders this week showed that home builder confidence improved in January, morale remained subdued.
Single-family home construction rebounded in December, but permits for future construction fell to more than a 2-1/2 year low and outside of the pandemic slump were the lowest since February 2016.
A “For Rent, For Sale” sign is seen in front of a home in Washington, the United States, July 7, 2022. Portal/Sarah Silbiger
Stocks on Wall Street traded higher. The dollar rose against a basket of currencies. US Treasury bond prices fell.
REDUCE MORTGAGE RATES
However, the worst downturn in the housing market is probably behind us. The interest rate on 30-year fixed-rate mortgages fell to an average of 6.15% this week, its lowest since mid-September, according to data from mortgage financing agency Freddie Mac.
The rate declined from 6.33% the previous week and is down from an average of 7.08% at the start of the fourth quarter, which was the highest since 2002. However , it is still well above the average of 3.56 % in the same period last year .
The average price of existing homes rose 2.3% year over year to $366,900 in December, with NAR chief economist Lawrence Yun noting that “markets in about half the country are likely to offer prospective buyers discounted prices compared to last year.” “.
The smallest price gain since May 2020, along with the fall in mortgage rates, could help improve affordability down the road, although much would depend on supply. Applications for home-buying loans have risen so far this year, a sign that eager buyers are waiting in the wings.
Home prices rose 10.2% in 2022, boosted by an acute shortage of homes for sale. The housing stock amounted to 970,000 units last year. While that was an increase from 2021’s 880,000 units, supply was the second-lowest on record.
“House price growth is likely to continue to slow and we expect it to turn negative in 2023,” said Nancy Vanden Houten, a US economist at Oxford Economics in New York. “The limited supply of homes for sale will prevent a sharp decline.”
There were 970,000 homes on the market in December, down 13.4% from November but up 10.2% from a year ago. At the pace of sales in December, it would take 2.9 months to exhaust the current inventory of existing homes, up from 1.7 months a year ago. That’s significantly less than the 9.6 months of supply at the start of the 2007-2009 recession.
Although tight inventories remain a stumbling block for buyers, the lack of oversupply means the housing market is unlikely to experience the dramatic collapse seen during the Great Recession.
A four to seven month supply is considered a healthy balance between supply and demand. Properties have typically stayed on the market for 26 days over the past month, up from 24 days in November.
57 percent of homes sold in December were on the market less than a month. First-time buyers accounted for 31% of sales, up from 30% a year ago. Cash sales accounted for 28% of transactions, compared to 23% a year ago. Distress sales, foreclosures, and short sales accounted for just 1% of sales in December.
“While stabilizing affordability will be good news for prospective home buyers, a lack of available inventory could remain a barrier to home buying activity,” said Orphe Divounguy, senior economist at Zillow.
Reporting by Lucia Mutikani; Edited by Dan Burns and Andrea Ricci
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