WASHINGTON, Jan 20 (Reuters) – U.S. existing home sales fell to a 12-year low in December, but falling mortgage rates raised cautious optimism that the embattled housing market may be close to finding a bottom. .
The report from the National Association of Realtors on Friday also showed that median home prices rose at the slowest rate since the beginning of the COVID-19 pandemic, as sellers in some parts of the country resorted to offering discounts.
The Fed’s fastest interest rate hike cycle since the 1980s has pushed housing into recession.
“Existing home sales are lagging a bit,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York. “Lower mortgage rates could help prop up real estate activity in the coming months.”
Existing home sales, which are counted when a contract closes, fell 1.5% to a seasonally adjusted annual rate of 4.02 million units last month, the lowest level since November 2010. That marked the 11th consecutive monthly drop in sales, the longest stretch of its kind. since 1999.
Sales fell in the Northeast, South and Midwest. They did not change in the West. Economists polled by Reuters had forecast home sales to fall at a rate of 3.96 million units. The December data likely reflected contracts signed about two months earlier.
Existing home sales, which account for a large share of US home sales, fell 34.0% year-on-year in December. They fell 17.8% to 5.03 million units in 2022, the lowest annual total since 2014 and the steepest annual drop since 2008.
The continued decline in sales, which meant lower brokerage commissions, was the latest indication that residential investment likely contracted in the fourth quarter, the seventh straight quarterly decline.
This would be the longest streak since the collapse of the housing bubble triggered the Great Recession.
While a National Association of Home Builders survey this week showed confidence among single-family homebuilders improved in January, morale remained depressed.
Single-family home construction rebounded in December, but permits for future construction fell to a more than 2 1/2-year low and, outside of the pandemic slump, were the lowest since February 2016.
Stocks on Wall Street were trading higher. The dollar rose against a basket of currencies. US Treasury prices fell.
MORTGAGE RATES IN RECESS
However, the worst of the housing market slump is probably behind us. The 30-year fixed mortgage rate fell to an average of 6.15% this week, the lowest level since mid-September, according to data from mortgage finance agency Freddie Mac.
The rate was down from 6.33% the previous week and has declined from an average of 7.08% at the beginning of the fourth quarter, which was the highest since 2002. However, it remains well above the 3-year average. .56% during the same period last year. . .
Median existing home price rose 2.3% from a year earlier to $366,900 in December, with NAR chief economist Lawrence Yun noting that “markets in about half the country are likely to offer to potential buyers at discounted prices compared to last year.
The smallest price increase since May 2020, coupled with declining mortgage rates, could help improve affordability going forward, though much would depend on supply. Home loan applications have increased so far this year, a sign that there are eager buyers waiting in the wings.
House prices rose 10.2% in 2022, fueled by a severe shortage of homes for sale. Housing inventory totaled 970,000 units last year. While that was up from 880,000 units in 2021, the supply was the second lowest on record.
“House price growth is likely to continue to slow and we expect it to turn negative in 2023,” said Nancy Vanden Houten, a US economist at Oxford Economics in New York. “The limited supply of houses for sale will prevent a sharp decline.”
In December, there were 970,000 second-hand homes on the market, 13.4% less than in November but 10.2% more than a year ago. At December’s sales pace, it would take 2.9 months to deplete current inventory of existing homes, up from 1.7 months last year. That’s considerably lower than the 9.6 months of supply at the start of the 2007-2009 recession.
Although tight inventory remains a drag for buyers, the absence of excess supply means the housing market is unlikely to experience the dramatic collapse seen during the Great Recession.
A four to seven month supply is considered a healthy balance between supply and demand. Properties typically stayed on the market for 26 days last month, up from 24 days in November.
Fifty-seven percent of homes sold in December were on the market for less than a month. First-time buyers accounted for 31% of sales, up from 30% a year ago. Cash sales accounted for 28% of transactions compared to 23% a year ago. Distressed sales, foreclosures and short sales accounted for just 1% of sales in December.
“While stabilizing affordability will be good news for potential homebuyers, a lack of available inventory could continue to be a constraint on homebuying activity,” said Orphe Divounguy, senior economist at Zillow.
Reporting by Lucía Mutikani; Edited by Dan Burns and Andrea Ricci
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