Existing home sales decreased in December to a seasonally adjusted annual rate of 6.18 million, snapping a run of three consecutive months of gains, according to the National Association of Realtors (NAR). Total existing home sales, which include single-family homes, townhomes, condominiums, and co-ops, declined 4.6% from November to December and 7.1% on a year-over-year (YOY) basis. Despite the decline in December, overall sales for 2021 increased 8.5%, according to the NAR.
“December saw sales retreat, but the pullback was more a sign of supply constraints than an indication of weakened demand for housing,” says NAR chief economist Lawrence Yun. “Sales for the entire year finished strong, reaching the highest annual level since 2006.”
Yun expects existing home sales to slow slightly in the coming months due to higher mortgage rates, but he notes that recent employment gains and stricter underwriting standards ensure home sales are in no danger of crashing. He forecasts mortgage rates will remain below 4% by year-end and wages will hold firm due to a tight labor market.
“This year, consumers should be prepared to endure some increases in mortgage rates,” Yun says. “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.”
Housing inventory at the end of December totaled 910,000 units, down 18% from November and 14.2% compared with a year ago. Unsold inventory sits at a 1.8-month supply at the present sales pace, down from 2.1 months in November and from 1.9 months in December 2020.
The median existing home price for all housing types in December was $358,000, a 15.8% increase from December 2020. Prices rose in each of the four major U.S. regions, with the South experiencing the highest pace of price appreciation, according to the NAR. The YOY increase in December 2021 marks 118 consecutive months of year-over-year increases, according to the NAR.
Properties typically remained on the market for 19 days in December, a day longer than in November and down two days from December 2020. Seventy-nine percent of homes sold in December 2021 were on the market for less than a month.
“We saw inventory numbers hit an all-time low in December,” says Yun. “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.”
First-time buyers were responsible for 30% of sales in December, an increase from 26% in November but down from 31% in December 2020. The annual share of first-time buyers in 2021 was 34%, according to the NAR. Individual investors or second-home buyers purchased 17% of homes in December, and all-cash sales accounted for 23% of transactions in December. Distressed sales—foreclosures and short sales—represented less than 1% of sales in December, equal to the percentage seen in both November 2021 and December 2020.
Single-family home sales dropped to a seasonally adjusted annual rate of 5.52 million in December, down 4.3% from November and 6.8% on a YOY basis. The median existing single-family home price was $364,300 in December, up 16.1% from December 2020.
Existing home sales decreased on a monthly and YOY basis in all four major U.S. regions.
Existing home sales in the Northeast fell 1.3% in December and decreased 15.7% from December 2020. Sales in the Midwest declined 1.3% on a monthly basis and 2.6% on a YOY basis. Existing sales in the South fell 6.3% in December and slid 5.3% on a YOY basis. The West experienced a 6.8% decline in existing home sales in December and a 10.2% decline compared with December 2020.
