According to the National Association of Realtors (NAR), the housing market in the US experienced its weakest year of home sales since 1995. The total existing home sales for the full year reached 4.09 million units, with sales declining across all regions compared to the previous year. In December alone, the seasonally adjusted total existing-home sales fell 1.0% from November, amounting to 3.78 million units, and a 6.2% drop from the previous year.
NAR economist Lawrence Yun predicts that this decline in sales may mark the bottom of the market, with sales expected to increase in the coming year. Yun attributes this potential turnaround to lower mortgage rates compared to two months ago and the anticipation of more available inventory in the market.
Despite the weaker sales, the median existing home price for all housing types experienced a 4.4% year-over-year increase, reaching $366,500 in December. This price increase was observed across all US regions and resulted in a record high median price of $389,800 for the full year.
The housing market's performance in the past year can be attributed to elevated mortgage rates and a low inventory of homes for sale. These factors discouraged potential buyers and made existing homeowners hesitant to sell their homes and lose the lower interest rates they secured in previous years. In December, the inventory of unsold existing homes dropped by 11.5% from the previous month, leaving only 1 million units available for sale. This limited inventory represents approximately 3.2 months of supply at the current sales pace.
Freddie Mac data indicates that the average rate on a 30-year fixed loan was 6.60% as of January 18, up from 6.15% a year ago but down from the peak of 8% in October.
Yun expresses concern about the rapid rise in home prices, stating that it is unsustainable and could lead to a division between those who can afford homes and those who cannot. He emphasizes the importance of economic and income growth, as well as an increase in home construction, to create opportunities for renters to become homeowners.