WASHINGTON (Reuters) – U.S. existing home sales fell in December to the lowest level in nearly 13-1/2 years, but a recovery could be in the cards this year as mortgage rates decline and housing inventory shows signs of improving.
Existing home sales slipped 1.0% last month to a seasonally adjusted annual rate of 3.78 million units, the lowest level since August 2010, the National Association of Realtors said on Friday. Economists polled by Reuters had forecast home sales would be unchanged.
Home resales are counted at the closing of a contract. The sales in December likely reflected contracts signed in the prior two months, when the average rate on the popular 30-year fixed-rate mortgage was stuck above 7.0%.
The 30-year fixed-rate mortgage rate averaged 6.60% this week, an eight-month low, compared to 6.66% in the prior week, according to data from mortgage finance agency Freddie Mac. That could boost home resales in the months ahead, with supply steadily rising.
“The latest month’s sales look to be the bottom before inevitably turning higher in the new year, said Lawrence Yun, the NAR’s chief economist. “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”
Sales fell in the densely populated South and the Midwest, which is considered the most affordable region. They rose in the West and were unchanged in the Northeast.
Home resales, which account for a large portion of U.S. housing sales, dropped 18.7% to 4.09 million units in 2023, the lowest level since 1995.
The government reported on Thursday that permits for future construction of single-family homes rose in December to the highest level since May 2022, while housing completions were the highest in 13 months, which could help boost supply.
There were 1.0 million previously owned homes on the market in December, up 4.2% from a year ago, but still below the nearly 2 million units before the COVID-19 pandemic. At December’s sales pace, it would take 3.2 months to exhaust the current inventory of existing homes, up from 2.9 months a year ago.
A four-to-seven-month supply is viewed as a healthy balance between supply and demand. With supply still tight, the median existing home price increased 4.4% from a year earlier to $382,600 in December. All four regions recorded price gains. The median home price on an annual basis hit a record high of $389,800 in 2023.
Properties typically stayed on the market for 29 days in December, up from 26 days a year ago. Fifty-six percent of homes sold last month were on the market for less than a month.
First-time buyers accounted for 29% of sales, compared to 31% a year ago. That share is well below the 40% that economists and realtors say is needed for a robust housing market. All-cash sales accounted for 29% of transactions, up from 28% a year ago.
Distressed sales, including foreclosures, represented only 2% of transactions, virtually unchanged from the prior year.
(Reporting by Lucia Mutikani; Editing by Paul Simao)