Existing Home Sales Slip in December

Summary

Weak Demand Continued to Depress Sales, but Improved Affordability Lessened the Blow

• Existing home sales declined for the 11th straight month, dropping 1.5% from November to December. This decline was shallower than expected and a softer drop than November, which was revised to a weaker 7.9% decline.
• The better-than-expected outcome for December still left existing home sales at a 4.02 million-unit annual pace, the lowest level since November 2010. Year-over-year, existing home sales were down 34.0%.
• While housing demand remains relatively depressed, lower mortgage rates and softer home price appreciation are likely starting to bring buyers off the sidelines.
• Mortgage rates started trending downward at the end of 2022 and averaged 6.36% in December. Rates have dropped even lower since then and averaged 6.15% during the week of January 19. The leg down in financing costs looks to have boosted mortgage demand. Mortgage applications for purchase jumped 24.7% in the second week of the year.
• The median single-family home price fell 1.6% in December to $372,700 on a not-seasonally adjusted basis. December marks the sixth straight month of falling home prices, declines that are partly influenced by seasonal factors but also driven by sellers adjusting prices lower to better align with lower buyer demand.
• The average days spent on the market has also inched up alongside weaker buyer demand. Average days on market increased to 26 days in December, up from 24 days in November and nearly double the 14-day average in the middle of 2022.
• Shaky market conditions continue to discourage homeowners from putting their homes on the market. Months' supply of single-family homes at the current sales pace declined to 2.9 months in December from 3.3 months in November. Inventory remains significantly below levels leading up to the housing bust, when months' supply peaked at just over 11 months.
• Condo and co-op sales experienced a sharper drop than single-family sales. Single-family sales fell 1.1% over the month, while condo and co-op sales declined by 4.5%.
• Existing home sales fell in every region except for the West, where sales were unchanged from November. Still, the West experienced the weakest growth in median home prices, which were up less than one percent over December 2021 levels.
• By contrast, home prices in the South have been more resilient, with median single-family home prices up 3.0% year-over-year in December.
• In December, sales fell 1.9% in the Northeast and 1.0% in the Midwest. While home prices in both regions are above their level a year ago, median single-family home prices declined 4.7% and 2.0% over the month, respectively.