Existing Home Sales Fall to Lowest Level Since 2010

The 11th consecutive month of December saw a slowdown in U.S. home sales higher mortgage ratesInflation and high home prices have slowed consumer demand for housing. 

The National Association of Realtors released new data Friday showing that sales of previously owned homes fell by 1.5% in December compared to the previous month. They now sell at an annual rate of 4.02million units. Annually, sales of existing homes are down 34% compared with December 2021. 

This is the slowest pace in the United States since November 2010, when it was still battling the housing crisis caused by subprime defaults.

A “for sale” A sign is displayed in front a Westwood, Massachusetts house on October 6, 2020. (AP Photo/Steven Senne, File / AP Newsroom)

“December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates,” Lawrence Yun, chief economist at NAR, stated in a statement. “However, expect sales to pick up again soon since mortgage rates have markedly declined after peaking late last year.”

According to the report, there were approximately 970,000 homes on the market at the end December. This is a decrease of 13.4% compared to November, but an increase of 10.2% compared with one year ago. The average sale of homes took 26 days. This is a significant improvement on the 24 days November saw and the 19 days last year. Homes used to sit on the market for around a month before they were sold.

The current sales pace would mean that it would take around 2.9 months for all existing homes to be sold. Experts believe that a pace of 6 to 7 months is a healthy pace. 

The brunt of the burden has been on the interest-rate-sensitive housing market. Federal Reserve’s aggressive campaign to tighten policy, slow down economy 

The current sales pace would mean that it would take around 2.9 months for all existing homes to be sold. Experts consider a pace of six to 7 months to be healthy. (Jeremy Erickson/Bloomberg via Getty Images / Getty Images

In order to curb inflation, policymakers have already raised the benchmark federal funds rates seven times consecutively in 2022. 

The average mortgage rate is still below the peak of 7.08% in November. The average mortgage rate is a 30-year fixed mortgage According to data from Freddie Mac mortgage lender, rates fell to 6.15% in this week. However, this is still significantly higher than the rates of just one year ago (when they hovered around 3.56%).

However, prices are still higher than they were one year ago, despite the fact that homeownership is no longer affordable by millions of Americans due to higher interest rates. December’s median sale price for an existing home was $372,000. This represents a 2% increase over last year. This is the longest-running streak of home price increases year-over-year, at 130 consecutive months. 

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However, prices have slowed slightly since peaking at $413,800 in June.

“The housing market is reeling from years of under-building, economic uncertainty and high interest rates,” Jeffrey Roach (chief economist at LPL Financial) added: “Given the confluence of these factors, housing affordability is the lowest since the mid-1980s.”