US Home Sales At 13-Year Low
The US housing market had a 1% monthly drop in sales of previously owned homes in December 2023 to 3.8 million properties. This number is over 6% below sales in December of the previous year and the fewest properties sold in a month for close to 13 years.
Previously owned home sales for 2023 were slightly over 4 million units, the lowest sales recorded since 1995.
Not all areas of the country were affected equally, though. Sales in the West increased by almost 8%, but this growth was offset by a drop of 4.3% in the Midwest and 2.8 in the South. Sales remained the same in the Northeast; however, every region reported lower sales than in 2022.
This plummeting home sales can be attributed to the heightened mortgage rates in late October and November, when most of these home sale contracts were probably made. The average rate for a 30-year fixed mortgage was around 8% in October, dropping to nearer to 7% in November, and is currently sitting at 7.22%.
Following the recent drop in mortgage rates, it is hoped that December will mark a turning point with the expectation that more properties will come onto the market in the next few months.
Close to 12% fewer properties were available for sale in December 2023 than in November, but the total was still 4% higher than in December 2022. The 1 million properties available at the end of last year represent just over three months' worth of supply at current sale rates, whereas closer to 6 months' supply is typically available.
Even with a shortage of supply, home prices continued to go up, with the average home sold in December now being priced at $382,000, up 4.5% from the same time the year before. December was the sixth consecutive month of year-on-year price increases, with average sales for the entire year hitting a record $390,000.
Properties also took longer than usual to sell in December, with an average of 30 days. In November, the average time for a property to be on the market before being sold was 25 days. More homes were sold for cash (29%) in December than the month before, but investor purchases, which make up a large percentage of all-cash sales, dropped from 18% in November to 16% in December.
This drop in investor activity might be good for private buyers as the combination of higher prices and borrowing costs deterred investors. With rents easing and more multi-family homes available, investors might continue to be cautious, lessening competition for potential first-time buyers who face the challenge of finding homes that they can afford.
The market is still very tough for those looking to get their feet on the first rung of the property ladder, and first-time buyers accounted for less than a third of sales in December, a drop of 30% from 2022. On average, closer to four out of ten homes have been sold to new entrants to the market.