US existing-home sales decline to cap worst year since 1995
SALES of previously owned US homes fell in December, capping the worst year for the housing market in nearly three decades.
Contract closings decreased 1 per cent from a month earlier to a 3.78 million annualised rate, according to National Association of Realtors (NAR) data released on Friday (Jan 19). For all of 2023, sales slipped back to the lowest level since 1995.
The housing market – one of the most interest-rate sensitive parts of the economy – reeled last year as the Federal Reserve raised borrowing costs to the highest level since the early 2000s.
Policymakers have since pivoted towards cutting rates, sending mortgage rates down from a peak near 8 per cent in October. But many existing homeowners are still hesitant to list their properties and move until rates fall further.
“The latest month’s sales look to be the bottom before inevitably turning higher in the new year,” said NAR chief economist Lawrence Yun. “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”
Yun noted that activity is picking up, and data this week showed mortgage applications for home purchases climbed to the highest level since July. Homebuilder sentiment has improved as well, which should help boost inventory of new construction.
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Last month, the number of previously owned homes for sale dropped to one million, the lowest since March. At the current sales pace, selling all the properties on the market would take 3.2 months. Realtors see anything below five months of supply as indicative of a tight resale market.
That lack of inventory is helping to keep prices elevated. The median selling price climbed to US$382,600 in December from a year ago, reflecting increases in all four regions. Prices hit a record of US$389,800 in 2023.
Some 56 per cent of the homes sold were on the market for less than a month. Properties remained on the market for 29 days, compared with 25 days in November.
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In the resale market, “a full recovery to the pre-pandemic sales rate is expected to take years,” according to new projections from Fannie Mae, which cited the high cost of homes relative to people’s incomes.
Existing-home sales account for the majority of purchases and are based on contract closings. Data on new-home sales, which reflect contract signings, are due next week. BLOOMBERG
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