In December, sales of previously
owned homes experienced a 1% decline compared to November, amounting to 3.78
million units on a seasonally adjusted annualized basis, as reported by the
National Association of Realtors. This reflects a 6.2% decrease from December
2022, marking the lowest level since August 2010.
A delivery man delivers packages in a Los Angeles neighborhood on January 17, 2024 |
For the entire year of 2023,
full-year sales reached 4.09 million units, representing the lowest figure
since 1995.
Examining regional trends on a month-to-month basis, sales remained unchanged in the Northeast and saw a 4.3% decline in the Midwest. The Southern region experienced a 2.8% drop, while the Western region witnessed a 7.8% rebound. On a year-over-year basis, sales decreased in all regions.
The count of home closings is
influenced by contracts likely signed in late October and November, a period
when mortgage rates were notably higher than their current levels. In October,
the average rate on a 30-year fixed loan reached approximately 8%, subsequently
dropping to the 7% range in November. As of the latest data from Mortgage News
Daily, the rate stands at 6.89%.
Lawrence Yun, the Chief Economist
at the National Association of Realtors (NAR), anticipates a positive shift in
the new year. He stated, “The latest
month’s sales look to be the bottom before inevitably turning higher in the new
year. Mortgage rates are meaningfully lower compared to just two months ago,
and more inventory is expected to appear on the market in upcoming months.”
While inventory experienced an 11.5% decline from November to December, it showed a 4.2% increase from December 2022. At the end of December, there were 1 million homes available for sale, resulting in a 3.2-month supply at the current sales pace. A balanced market typically maintains a six-month supply, ensuring equilibrium between buyer and seller dynamics.
The persistent tight supply
continues to drive up home prices, with the median price of a home sold in
December reaching $382,600. This represents a 4.4% increase from December 2022
and marks the sixth consecutive month of year-over-year price gains. For the
entire year, the median price reached a record high of $389,800.
In December, homes lingered on the
market for an average of 29 days, up from 25 days in November. The share of
all-cash sales increased to 29% from 27% in November. Notably, individual
investors, who constitute a significant portion of all-cash sales, purchased
16% of homes, a slight decrease from 18% in November.
The reduced activity from investors could be a positive development for buyers. A recent Realtor.com study indicates that both higher home prices and increased financing costs contributed to a decline in investor home purchases for the full year 2023.
Danielle Hale, Chief Economist at
Realtor.com, suggests that as rents continue to ease and more multi-family
homes become available for rent, investors may adopt a more cautious approach
in the housing market. This caution could result in reduced competition for
potential first-time home buyers entering the 2024 market with optimism.
However, these buyers still face challenges in purchasing homes below the
median price point, which is often targeted by investors.
Despite their optimism, first-time
buyers are encountering difficulties, constituting only 29% of December sales,
down from 31% the previous year. Historically, first-time buyers typically
represent 40% of the market.
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