Existing-home sales declined in December, snapping a streak of three straight months of gains, according to the National Association of Realtors (NAR). Each of the four major U.S. regions witnessed sales fall in December from both a month-over-month and a year-over-year basis. Despite the drop, overall sales for 2021 increased 8.5 percent.
Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 4.6 percent from November to a seasonally adjusted annual rate of 6.18 million in December. From a year-over-year perspective, sales waned 7.1 percent (6.65 million in December 2020).
“December saw sales retreat, but the pull back 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.”
Yun, however, does expect existing-home sales to slow slightly in the coming months due to higher mortgage rates, but noted that recent employment gains and stricter underwriting standards ensure home sales are in no danger of crashing. He forecasts rates to remain below 4 percent by year-end and wages to hold firm due to a tight labor market.
“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.”
Total housing inventory at the end of December amounted to 910,000 units, down 18.0 percent from November and down 14.2 percent from one year ago (1.06 million). 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.
“We saw inventory numbers hit an all-time low in December,” Yun said. “Home builders have already made strides in 2022 to increase supply, but reversing gaps like the ones we’ve seen recently will take years to correct.”
The median existing-home price for all housing types in December was $358,000, up 15.8 percent from December 2020 ($309,200), as prices rose in each region. The South witnessed the highest pace of appreciation. This marks 118 straight months of year-over-year increases, the longest-running streak on record.
First-time buyers were responsible for 30 percent of sales in December, up from 26 percent in November and down from 31 percent in December 2020. Individual investors or second-home buyers, who make up many cash sales, purchased 17 percent of homes in December, up from 15 percent in November and up from 14 percent in December 2020. All-cash sales accounted for 23 percent of transactions in December, down from 24 percent in November, and up from 19 percent from December 2020.
Regional Breakdown
Existing-home sales in the Northeast fell 1.3 percent in December, registering an annual rate of 750,000, a 15.7 percent decrease from December 2020. The median price in the Northeast was $384,600, up 6.3 percent from one year ago.
Existing-home sales in the Midwest slid 1.3 percent to an annual rate of 1,500,000 in December, a 2.6 percent decline from a year ago. The median price in the Midwest was $256,900, a 10.0 percent climb from December 2020.
Existing-home sales in the South retreated 6.3 percent in December, posting an annual rate of 2,700,000, a drop of 5.3 percent from one year ago. The median price in the South was $323,000, a 20.2 percent ascension from one year prior.
Existing-home sales in the West decreased 6.8 percent, reporting an annual rate of 1,230,000 in December, down 10.2 percent from one year ago. The median price in the West was $507,100, up 8.4 percent from December 2020.