As elevated mortgage rates and tight inventory continue to weaken housing demand, the volume of existing home sales declined for an eleventh consecutive month as of December, according to the National Association of Realtors (NAR). This is the longest run of declines since 1999. While mortgage rates have retreated in recent weeks due to recession concerns, they are likely to see another up cycle in early 2023 as the Fed ends its rate tightening cycle. Additionally, home price appreciation slowed for the sixth month after reaching a record high existing home average of $413,800 in June.
Total existing home sales, including single-family homes, townhomes, condominiums and co-ops, fell 1.5% to a seasonally adjusted annual rate of 4.02 million in December, the lowest pace since November 2010 with the exception of April and May 2020. On a year-over-year basis, sales were 34.0% lower than a year ago. In 2022, existing sales totaled 5.03 million, down from 17.8% from 2021. This marks the lowest annual total since 2014 and the largest annual decline since 2008.
The first-time buyer share stayed at 31% in December, up from 28% last month and 30% in December 2021. The fact that this share has stayed stable is a positive sign of future homebuying demand. The December inventory level measure fell from 1.12 to 0.97 million units but was up 0.88 million from a year ago.
At the current sales rate, December unsold inventory sits at a 2.9-month supply, down from 3.3-months in November but up from a 1.7-months reading a year ago.
Homes stayed on the market for an average of 26 days in December, up from 24 days in November and 19 days in December 2021. In December, 57% of homes sold were on the market for less than a month.
The December all-cash sales share was 28% of transactions, up from 26% last month and 23% a year ago. All-cash buyers are less affected by changes in interest rates.
The December median sales price of all existing homes was $366,900, up 2.3% from a year ago, representing the 130th consecutive month of year-over-year increases, the longest-running streak on record. The median existing condominium/co-op price of $317,200 in December was up 3.3% from a year ago.
Geographically, three regions saw a decline in existing home sales in December, ranging from 1.0% in the Midwest to 2.2% in the South. Sales in the West remained unchanged in December. On a year-over-year basis, all four regions continued to see a double-digit decline in sales, ranging from 28.8% in the Northeast to 43.4% in the West.
The Pending Home Sales Index (PHSI) is a forward-looking indicator based on signed contracts. The PHSI fell 4.0% from 77.0 to 73.9 in November, the second lowest reading in 20 years. On a year-over-year basis, pending sales were 37.8% lower than a year ago per the NAR data.