December existing home sales add to bleak 2022 total, but falling rates offer hope ahead

First, the bad news: Existing home sales retreated by 1.5% month over month in December, marking the 11th straight decline of residential sales on a national basis.

That’s according to the National Association of Realtors (NAR), which reported that December existing home sales came in at a seasonally adjusted annual pace of 4.02 million. Year over year, this rate was down 34% and marked the lowest annualized pace since November 2010. Eleven consecutive monthly decreases in the sales rate also mark a dubious streak unseen since 1999.

Full-year numbers were likewise austere, with existing home sales totaling 5.03 million for all of 2022. That’s down 17.8% from 2021 — the steepest yearly plunge since 2008 — to fall to the lowest full-year total since 2014.

“December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates,” NAR chief economist Lawrence Yun said.

Despite the persistent slowdowns, many observers, including Yun, see some glimmers of sunshine in the otherwise bleak report. For one, the 1.5% monthly slide from November to December wasn’t quite as sharp as expected, with a Reuters poll of economists projecting last month’s pace to fall to 3.96 million units. This may seem like cold comfort, but lower mortgage rates and slowing home price appreciation in December are likely pushing homebuyers into activity, which bodes well for the months ahead.

“Expect sales to pick up again soon since mortgage rates have markedly declined after peaking late last year,” Yun said.

Mortgage rates averaged 6.36% in December after exceeding 7% earlier in the year. They’ve ebbed even lower since, averaging 6.1% during the week of Jan. 19, according to Wells Fargo. That’s helped to provide an influx in demand, with purchase mortgage applications growing by 1.2% on a seasonally adjusted basis in the first week of the year before jumping by 27.9% the following week, according to the Mortgage Bankers Association. (Note that the second-week jump is inflated somewhat by the previous week spanning the New Year’s holiday.)

Buyers returning to the fray also are seeing home prices moving in their favor. The median single-family home price dropped by 1.6% from November to December to reach $366,900. Home prices have now decreased on a monthly basis for six consecutive months, a drop that’s partially driven by seasonality, but this trend also has been propelled by sellers shifting their price expectations downward to entice buyers off the sidelines. Prices remained 2.3% higher on a year-over-year basis, making December the 130th straight month of annualized home price increases (the longest streak ever recorded by NAR).

“Home prices nationwide are still positive, though mildly,” Yun added. “Markets in roughly half of the country are likely to offer potential buyers discounted prices compared to last year.”


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