Existing home sales dipped in December, marking a year of declines

The real estate market witnessed a continued decline in existing home sales in December, marking a year-end slowdown in an already fragile housing sector. According to the National Association of Realtors®, sales decreased by 1.0% to a seasonally adjusted annual rate of 3.78 million, compounding a 6.2% drop from the previous year.

This downturn in sales activity was felt across most regions in the United States. The Midwest and South reported reduced sales, while the West saw a modest increase, and the Northeast remained static. Despite these regional variations, all areas faced year-over-year sales declines.

2023 emerged as a year of contrast in the housing market. Existing home sales fell to their lowest since 1995, totaling 4.09 million, yet the median home price soared to a record $389,800. The median price in December alone climbed 4.4% from the previous year, reaching $382,600, marking the sixth consecutive month of year-over-year increases.

Inventory issues continued to impact the market. The stock of unsold existing homes at the end of December plummeted by 11.5% from the previous month to just 1 million units, translating to a supply of 3.2 months at the current sales pace. Despite this monthly decline, the inventory level was 4.2% higher than a year ago.

Lawrence Yun, Chief Economist at NAR, commented, “The latest month’s sales look to be the bottom before inevitably turning higher in the new year. Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”

The report also sheds light on the shifting dynamics of home buyers. First-time buyers accounted for 29% of sales in December, a slight decrease from previous months. Cash transactions made up 29% of the sales, indicating a consistent presence of investors in the market. However, distressed sales remained a minimal component, making up only 2% of the total.