December Home Sales Mark Worst Year Since 1995

In December, sales of previously owned homes experienced a 1% decline compared to November, reaching 3.78 million units on a seasonally adjusted annualized basis, according to data from the National Association of Realtors (NAR). This figure marks a 6.2% decrease from December 2022, reaching the lowest level since August 2010, and contributes to the full-year sales for 2023 amounting to 4.09 million units, the lowest recorded since 1995.

Regionally, monthly sales remained unchanged in the Northeast, declined by 4.3% in the Midwest, were down by 2.8% in the South, and rebounded by 7.8% in the West. On a year-over-year basis, sales declined across all regions. The count of home closings is based on contracts likely signed in late October and November, during a period when mortgage rates were significantly higher than the current rate of 6.89%, as reported by Mortgage News Daily, having fallen from about 8% in October. Lawrence Yun, NAR’s chief economist, anticipates a potential rebound in the new year, attributing the recent sales dip to higher mortgage rates, which have now decreased, and the expectation of increased inventory in the coming months.

Despite a decline of 11.5% in inventory from November to December, inventory levels rose by 4.2% compared to December 2022. With 1 million homes for sale at the end of December, the supply represents a 3.2-month pace at the current sales rate, below the balanced six-month threshold for buyer-seller equilibrium.

The tight supply continues to drive home prices higher, with the median price reaching $382,600 in December, reflecting a 4.4% increase from December 2022. This marks the sixth consecutive month of year-over-year price gains, culminating in a record-high median price of $389,800 for the full year.

Homes stayed on the market longer in December, averaging 29 days, up from 25 days in November. The share of all-cash sales rose to 29% from 27% in November, while individual investors, comprising a significant portion of all-cash sales, purchased 16% of homes, down from 18% in November. The pullback in investor activity may provide a positive outlook for buyers, as both higher home prices and increased financing costs contributed to fewer investor home purchases in 2023, according to a Realtor.com study.

However, first-time buyers continue to face challenges, constituting only 29% of December sales, down from 31% the previous year and significantly below the historical average of 40% in the market. Despite the hurdles, potential first-time homebuyers remain optimistic in approaching the 2024 market, even as they contend with the challenges of buying a home below the median price point often targeted by investors.