Existing Home Sales Slow for First Time in Four Months
January 20, 2022
Sales of previously owned homes, which account for 90% of all U.S. home sales, in 2021 reached the highest level since 2006. Sales did unexpectedly slow in December, suggesting that the red-hot housing market may cool a bit in 2022.
Closings on existing homes were down 4.6% in December from the prior month for an annualized total of 6.18 million. Economists surveyed by Bloomberg expected a 6.42 million annualized rate in December.
The slowdown comes amid climbing mortgage rates, which have climbed to the highest level since March 2020, and record-low inventory. There were just 910,000 homes for sale in December, 18% less than in the month prior and 14.2% less than during the same month a year earlier. At the current pace, it would take just 1.8 months to sell all the homes on the market, a record low.
With low inventories and climbing mortgage rates, buyers have been eager to snatch up whatever is available, resulting in bidding wars that are driving up home prices. Homes sold last month were only on the market for an average of 19 days, compared to 21 days a year prior. The median selling price rose 15.8% in December from a year ago to $358,000, and on an annual basis, home prices appreciated last year by the most since 1999.
Some first-time buyers looking for an affordable starter home may be finding themselves priced out of the market. In December, sales of homes costing less than $250,000 declined, while purchases of homes priced above $500,000 increased.