Housing Market Sees Weakest Year in Nearly 3 Decades

January 18, 2024

The housing market’s slump continued in December as high mortgage rates and low inventory continued to weigh on the market, closing out the worst year for home sales in nearly 30 years.

Sales of previously owned homes fell 1% in December from the month prior, for a total of 3.78 million units on a seasonally adjusted annualized basis, according to the National Association of Realtors (NAR). Sales were 6.2% lower than in December 2022, marking the lowest level since August 2010.

Full-year sales for 2023 amounted to 4.09 million units, the lowest total since 1995.

In a statement, the NAR’s chief economist said that December’s sales “look to be the bottom before inevitably turning higher in the new year.”

The NAR points to the meaningful retreat mortgage rates have taken in recent months. December’s sales figures were based on closing contracts signed in October and November when mortgage rates were significantly higher than they are now. The average rate for a 30-year fixed-rate mortgage topped 8% in October and has since fallen to 6.89%.

Scarce inventory continues to be a hindrance for the market. Inventory fell 11.5% in December from the month prior, but was 4.2% higher than in December 2022. That amounts to an additional 1 million homes for sale at the end of December as compared to a year earlier, but even with the increase, the market has a supply of just 3.2 months at the current sales pace. A supply of 6 months is generally considered to represent a balance between buyers and sellers.

Constrained supply continues to push prices higher. The median price of a home sold in December rose to $382,000, a 4.4% increase from December 2022. That is the sixth consecutive month that has seen year-over-year price gains. For the full year, the median price was $389,900, a record high.

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