There is a sign outside of a home in Geneseo, Illinois.
In December, closed sales of previously owned homes fell 4.6% to a rate of 6.18 million units. Sales were down over the course of the year.
December was the final month of the year that saw strong sales due to the Pandemic and by the largest generation, the baby boomers. In the full-year of 2021, sales increased by 8.5%. It was the best year since 2006
It is possible that sales could have been higher if it was not for the low supply. At the end of December, there were just 910,000 homes for sale, a drop of 14.2% from December 2020. At the current sales pace, that is a 1.8-month supply. A balanced market is usually 3-6 months. The total supply and month's supply are all-time lows on the NAR's inventory count.
Home builders have already made strides to increase supply, but reversing gaps like the ones we have seen recently will take years to correct.
Prices were put under pressure by low supply. The median price of an existing home sold in December was $358,000, an increase of 15.8% compared with December 2020. The slight reacceleration of home price gains suggests that demand is still strong.
The high end of the market has so much more supply that sales are stronger there. Sales of homes priced between $100,000 and $250,000 fell in December from the previous month, while sales of homes priced between $750,000 and $1 million increased. Home sales priced over $1 million increased by 38%.
The median price for the full year was a record high of $346,900, the fastest price growth since 1999. The average homeowner gained $50,200 in housing wealth last year because of the price increase.
The average number of days it took to sell a home in December was 19. That is fast. In December 2020, the days-on-market was 21. All-cash purchases made up 23% of all sales. 18% of December sales went to investors, up from 12% the previous year.
Home prices have gone up over the last two years due to low interest rates. That could be about to change. The average rate on the 30-year fixed mortgage in October and November was about 60 basis points lower than it is today. Mortgage rates have been rising quickly over the last month, and some think that will take some of the heat out of home prices.
After a weak showing in November, first-time buyers make up 30% of sales. These buyers may be rushing in because they are worried that mortgage rates will go up even more.
Some people may want to jump in as mortgage rates increase further, but others may be priced out. Home sales are usually cut by rising rates.