The phrase “in like a lion, out like a lamb” is typically used to describe the month of March, but it is also applicable to existing home sales trends in 2022. After posting a 6.5% month-over-month increase in January, existing home sales trended downward throughout the rest of the year.
In December, the seasonally adjusted sales pace for existing homes dropped 1.5% from November to a pace of 4.02 million, according to a report from the National Association of Realtors (NAR) released Friday. This is the 11th consecutive month of monthly declines.
On a yearly basis, existing home sales were down 34% in December.
“The housing market may have started 2022 out with a bang, but it exited the year with a whimper,” Lisa Sturtevant, Bright MLS’ chief economist, said in a statement. “With the exception of May 2020, when the pandemic had virtually shut down housing market activity, this is the lowest level of monthly home sales in 12 years.”
A total of 5.03 million existing homes were sold in 2022, down 17.8% from 2021, which NAR attributes to the “rapidly escalating interest rate environment.”
“December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates,” Lawrence Yun, NAR’s chief economist, said in a statement. “However, expect sales to pick up again soon since mortgage rates have markedly declined after peaking late last year.”
December’s slower sales pace was reflected by an increase in the typical number of days a home spent on the market, which grew to 26 days, up from 24 days in November and 19 days a year prior.
But as sales slowed in December, the inventory of unsold existing homes also receded, dropping 13.4% from November to 970,000, which represents 2.9 months of supply at the current sales pace. Despite the monthly drop, the unsold inventory at the end of December is up 10.2% year over year.
“It’s possible the inventory picture will improve in the coming weeks, but this is still an unusual housing market. In a typical spring market, sellers lead buyers, with new listings coming on the market in the early part of the year before buyers start thinking about shopping,” Sturtevant said. “This year, buyers may be out in front of supply, and the market could be surprisingly competitive.”
The continued low level of inventory has helped maintain annual home price appreciation, with the median sale price posting a 2.3% year-over-year increase in December to $366,900. This marks the 130th consecutive month of annual price increases.
“Home prices nationwide are still positive, though mildly,” Yun added. “Markets in roughly half of the country are likely to offer potential buyers discounted prices compared to last year.”
With interest rates still markedly higher than they were a year ago, all-cash buyers made up a larger share of homebuyers in December at 28% of transactions, compared to 23% a year ago.
“Cash buyers are unaffected by fluctuations in mortgage rates and were able to take advantage of lower prices in some areas,” Yun said.
The share of first-time homebuyers was also up slightly in December compared to a year prior, making a one percentage point jump to 31%.
“Realtors helped millions of Americans achieve the dream of homeownership in the midst of a housing market that experienced some tough headwinds last year,” Kenny Parcell, the president of NAR, said in a statement. “In 2023, we’ll continue to work with legislators and real estate leaders at all levels to address inventory shortages and increase access to homeownership.”
Regionally, existing home sales fell month over month in three out of the four regions, as the West remained unchanged from November. However, the sales pace of 690,000 represented a 43.3% annual drop. The South posted the largest monthly decline, dropping 2.2% to a pace of 1.80 million, which represents a 33.1% year-over-year decrease.