Existing Home Sales declined 4.6 percent for the month but sales are at the highest annual total since 2006.
Highest Annual Sales Since 2006
The National Association of Realtors (NAR) reports Annual Existing-Home Sales Hit Highest Mark Since 2006.Key Highlights
- In 2021, existing-home sales totaled 6.12 million—an increase of 8.5 percent from the prior year and the highest annual level since 2006.
- At the end of December, the inventory of unsold existing homes fell to an all-time low of 910,000, which is equivalent to 1.8 months of the monthly sales pace, also an all-time low since January 1999.
- In December, existing-home sales on a seasonally adjusted annualized rate slowed to 6.18 million, a 4.6 percent decrease from November.
Housing Snapshot
NAR Optimistic
- “December saw sales retreat, but the pull back was more a sign of supply constraints than an indication of a weakened demand for housing,” said Lawrence Yun, NAR’s chief economist. “Sales for the entire year finished strong, reaching the highest annual level since 2006.”
- “This year, consumers should prepare to endure some increases in mortgage rates,” Yun cautioned. “I also expect home prices to grow more moderately by 3% to 5% in 2022, and then similarly in 2023 as more supply reaches the market.”
- “We saw inventory numbers hit an all-time low in December,” Yun said. “Home builders have already made strides in 2022 to increase supply, but reversing gaps like the ones we’ve seen recently will take years to correct.”
Regional Breakdown
- Northeast sales, the smallest region, fell 1.3 percent in December, registering an annual rate of 750,000, a 15.7 percent decrease from December 2020. The median price in the Northeast was $384,600, up 6.3 percent from one year ago.
- Midwest sales fell 1.3 percent to an annual rate of 1,500,000 in December, a 2.6 percent decline from a year ago. The median price in the Midwest was $256,900, a 10.0 percent climb from December 2020.
- South sales, the largest region fell 6.3 percent in December, posting an annual rate of 2,700,000, a drop of 5.3 percent from one year ago. The median price in the South was $323,000, a 20.2 percent ascension from one year prior.
- West sales, the second largest region decreased 6.8 percent at an annual rate of 1,230,000, down 10.2 percent from one year ago. The median price in the West was $507,100, up 8.4 percent from December 2020.
Hot Market
- Properties typically remained on the market for 19 days in December, one day more than the 18 days seen in November, and down from 21 days in December 2020. Seventy-nine percent of homes sold in December 2021 were on the market for less than a month.
- Individual investors or second-home buyers, who make up many cash sales, purchased 17 percent of homes in December, up from 15 percent in November and up from 14 percent in December 2020.
- Median price up 6.3 percent in the Northeast, 10 percent in the Midwest, 20.2 percent in the South, and 8.4 percent in the West.
What Will It Take to Sink the Housing Market?
Sales are hot thanks to cheap money from the Fed, rising rent prices, speculation, fear of missing out, three rounds of fiscal stimulus, and a booming stock market.It’s difficult to put a percentage on each of those factors but they all tie together.
If the Fed gets in 3 or 4 rate hikes, mortgage rates will go up and so will alleged affordability.
The stock market boom makes people feel wealthy and that leads to second home buying which in turn reduces supply available to first-time buyers.
Fear of missing out (FOMO) is always a factor in bubbles and the Fed sure blew another. Housing speculation is nowhere near as great as in 2007 but the stock market euphoria is much greater.
Finally, there does not have to be any reason for a selloff other than a change in sentiment.
Think back to 2006 when there were lines around the block for the right to enter a lottery to buy a Florida condo. Two weeks later there were no lines.
That spread from city to city and quickly nationwide. Sentiment changed and there was no apparent trigger. The pool of greater fools simply ran out.
