US existing home sales to slide to 11-year low in 2023

SALES of previously owned US homes will fall for a second year in 2023 to their lowest annual total since 2012 when the housing market was still in a slow recovery from the sub-prime mortgage crisis, but sale prices should hold up, the National Association of Realtors (NAR) said on Tuesday (Dec 13).

Existing home sales, which have fallen each month since January as mortgage rates surged on the back of the Federal Reserve’s aggressive campaign to hike interest rates to control inflation, are projected to fall by another 6.8 per cent to 4.78 million in 2023, said Lawrence Yun, NAR chief economist and senior vice-president of research.

Sales through October of this year are just shy of 4.4 million, and Yun estimates the 2022 total will reach 5.13 million units when November and December data are reported – down by more than 16 per cent from 2021‘s 6.12 million. That year saw the highest sales total since 2006, just ahead of the financial crisis.

Prices will continue to be supported by supply constraints and should remain more or less flat, with the median transaction price estimated at US$385,800 versus US$384,500 this year, NAR said.

“The demand for housing continues to outpace supply,” Yun said.

There were 1.22 million existing homes for sale in October, roughly half of the average monthly inventory of 2.3 million units since 1982.

“Half of the country may experience small price gains, while the other half may see slight price declines,” Yun said. “However, markets in California may be the exception, with San Francisco, for example, likely to register price drops of 10-15 per cent.”

Mortgage rates, which topped 7 per cent in October for 30-year fixed-rate loans, should ease to 5.7 per cent as the Fed dials back on its rate-hike campaign, Yun predicted. They stood at 6.41 per cent in early December, said the Mortgage Bankers Association.

A second straight weaker-than-expected reading of US consumer inflation in November, reported earlier on Tuesday, is expected to offer the Fed cover to slow its rate hike pace to 50 basis points at its policy meeting this week, after four straight 75-basis-point increases.

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Yun also estimates that rental inflation will ease next year too, with rents rising 5 per cent, down from 7 per cent this year. REUTERS