US Existing Home Sales Fall to Near 30-Year Low

The decline in sales happened as mortgage rates rose and made homes more expensive for buyers.
US Existing Home Sales Fall to Near 30-Year Low
A "For Sale" sign is posted outside a single-family home in Philadelphia on Dec. 1, 2023. Matt Rourke/AP Photo
Naveen Athrappully
Updated:
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Sales of existing homes tumbled last year to the lowest in 28 years, even as property prices jumped to record highs, according to the National Association of Realtors (NAR).

Existing home sales declined in 2023 to 4.09 million units, the lowest since 1995, NAR said in a Jan. 19 statement. At the same time, the median price of homes rose to a “record high” of $389,800.

“Despite sluggish home sales, 85 million homeowning households enjoyed further gains in housing wealth,” NAR Chief Economist Lawrence Yun said. “Obviously, the recent, rapid three-year rise in home prices is unsustainable.

“If price increases continue at the current pace, the country could accelerate into haves and have-nots. Creating a path towards homeownership for today’s renters is essential. It requires economic and income growth and, most importantly, a steady buildup of home construction.”

In December 2023, existing home sales declined from the previous month as well as from a year ago. The total housing inventory at the end of the month was 1 million units, down by 11.5 percent from November 2023 but an increase of more than 4 percent from 2022.

Unsold inventory is now only enough to meet 3.2 months of supply at the current pace of sales, down from 3.5 months in November 2023.

“The latest month’s sales look to be the bottom before inevitably turning higher in the New Year,” Mr. Yun said. “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”

Since the COVID-19 pandemic, home sales have seen ups and downs in accordance with changing mortgage interest rates. By the end of the first pandemic year in 2020, about 5.5 million homes were sold; that increased to 6 million in 2021 as mortgage rates declined.

However, beginning in early 2022, the U.S. Federal Reserve began raising its benchmark interest rate, which also triggered a jump in mortgage rates, thereby making mortgages more expensive for prospective homeowners.
Between January 2022 and December 2023, the Fed raised its effective rate to 5.33 percent from 0.08 percent. During this time, the average weekly rate for a 30-year fixed-rate mortgage increased to 6.61 percent from 3.22 percent. Home sales dropped to 5 million in 2022 and then to roughly 4 million last year.

Lisa Sturtevant, chief economist at Bright Multiple Listing Service, doesn’t think that mortgage rates alone are responsible for the low home sales.

“The demand for housing—and homeownership, in particular—has remained high, despite higher rates,” she said in a statement, according to CNN. “Prospective homebuyers have been shut out of the market by a lack of inventory. If there had been more listings on the market in 2023, we would have had more home sales.”

2024 Situation

While mortgage rates have remained elevated over the past year, they’ve been declining in recent weeks. For the week that ended on Jan. 17, the average 30-year fixed-rate mortgage was 6.60 percent, down from 7.79 percent in late October 2023, according to Freddie Mac.

Mortgage rates decreased in the week to hit their lowest level since May 2023.

“This is an encouraging development for the housing market and, in particular, first-time homebuyers who are sensitive to changes in housing affordability,” Freddie Mac stated on its website.

“However, as purchase demand continues to thaw, it will put more pressure on already depleted inventory for sale.”

Real estate brokerage Redfin is reporting higher interest from homebuyers due to lower rates. Homebuyers and homesellers are both now making a move “largely because mortgage rates are holding steady in the mid-6 percent range,” the company said in a Jan. 18 statement.

Agents from the company claim that demand and listings would be increasing even more now if the United States wasn’t experiencing a severe winter.

“We expected both buyers and sellers to react more strongly to last month’s drop in mortgage rates once the holidays passed, but frigid weather and snowstorms have halted a lot of buying and selling plans,” Redfin economic research lead Chen Zhao said. “As long as rates don’t shoot up, we expect the market to pick up as the spring season approaches.”

Chicago Redfin premier agent Dan Close pointed out that homebuyers are feeling “more confident” that they'll be able to secure good value for their money.

“Many first-timers are jumping in because Chicago rents are still rising,“ Mr. Close said. ”Homeowners who were waiting for the holidays to be over and rates to come down before selling are getting ready to list. I have several listings prepped to hit the market, some as early as this week and some throughout the rest of the first quarter.”

High mortgage rates are a key factor keeping many sellers from entering the market. Redfin reports that 89 percent of Americans with mortgages have an interest rate below 6 percent, which is less than the current 6.6 percent rate.

Hence, such individuals have a lower incentive to sell their homes since they may then have to buy a home at a higher rate. However, some homeowners are still selling, enticed by the higher home prices.

Naveen Athrappully
Naveen Athrappully
Author
Naveen Athrappully is a news reporter covering business and world events at The Epoch Times.
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