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).
“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.
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.”
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.”
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.
