Existing home sales dropped in December, snapping a three-month streak of increases. The National Association of Realtors® (NAR) said the month’s sales of pre-owned single-family houses, townhouses, condos, and cooperative apartments fell 4.6 percent from November’s 6.460 million-unit pace to a seasonally adjusted annual rate of 6.18 million in December. From a year-over-year perspective, sales were down 7.1 percent from 6.65 million in December 2020.
Even with the year-end slide, sales in 2021, at an apparent 6.12 million units, represented an 8.5 percent increase from 2020. It was the highest annual level since 2006.
Analysts substantially overshot with their December estimates. Those polled by Econoday had a consensus forecast of 6.400 million units while Trading Economics reported a consensus of 6.44 million.
Single-family home sales dropped 4.3 percent from 5.77 million units in November to a seasonally adjusted annual rate of 5.52 million, a 6.8 percent year-over-year decline. Condominium and co-op sales slid 7.0 percent from the 710,000-unit level in November and were 9.6 percent lower than in December 2020 at an annual rate of 660,000 units.
“December saw sales retreat, but the pullback was more a sign of supply constraints than an indication of a weakened demand for housing,” said Lawrence Yun, NAR’s chief economist. “Sales for the entire year finished strong, reaching the highest annual level since 2006.”
“This year, consumers should prepare to endure some increases in mortgage rates,” Yun cautioned. “I also expect home prices to grow more moderately by 3 percent to 5 percent in 2022, and then similarly in 2023 as more supply reaches the market.”
He also predicts that rising rates will cause existing-home sales to slow slightly in the coming months, but that recent employment gains and stricter underwriting standards ensure sales are in no danger of crashing. He expects interest rates to remain below 4 percent this year and that wages will hold firm due to a tight labor market.
Inventories declined again in December, falling below a million to an all-time low of 910,000 units, an 18 percent decline in a month. Unsold inventory sits at a 1.8-month supply at the present sales pace, down from 2.1 months in November and from 1.9 months in December 2020. Properties typically remained on the market for 19 days in December, one day more than the 18 days in November, but down from 21 days in December 2020. Seventy-nine percent of homes sold last month were on the market for less than a month.
The median existing-home price for all housing types in December was $358,000, up 15.8 percent from the December 2020 median of $309,200. Prices increased in every region with the South gaining at the highest rate. This marks 118 straight months of year-over-year increases, the longest-running streak on record.
The median existing single-family home price was $364,300 in December, up 16.1 percent from December 2020. The median existing condo price was $305,100 in December, an annual increase of 11.9 percent.
First-time buyers were responsible for 30 percent of sales in December, a 4-percentage point gain compared to November but down from 31 percent a year earlier. Yun said the significant surge was likely due to buyers’ intent on avoiding the inevitable rate increases.
Individual investors or second-home buyers purchased 17 percent of homes in December and all-cash sales, many of them investor driven, accounted for 23 percent of transactions during the month. Foreclosures and short sales accounted for less than 1 percent of transactions, a share that has been unchanged for many months.
“We wrapped up the year witnessing home sales exceed the previous year’s total and saw millions of families secure housing,” said NAR President Leslie Rouda Smith. “I think the positive momentum will continue as the market prepares to finally see more supply in the coming months, meaning more buyers will be able to land their dream home.”
The decline in sales drove all four major regions of the country down from both their November and their December 2020 rates of sale. Existing-home sales in the Northeast fell 1.3 percent to an annual rate of 750,000, 15.7 percent lower than a year earlier. The median price in the Northeast was $384,600, up 6.3 percent from one year ago.
Sales in the Midwest slid 1.3 percent to an annual rate of 1,500,000, a 2.6 percent decline from the prior December. The median price grew 10.0 percent to $256,900.
The South says existing-home sales retreated 6.3 percent to an annual rate of 2,700,000 units. This is 5.3 percent lower on an annual basis. The median price increased 20.2 percent to $323,000.
Existing-home sales in the West fell 6.8 percent from November and 10.2 percent year-over-year to a 1,230,000-unit pace. The median price in the region rose 8.4 percent to $507,100.