U.S. home sales ended 2021 on a weak note in December, but annual sales activity for the full year hit its highest level since 2006.
Sales of existing homes fell 4.6% to 6.18 million seasonally adjusted units in December from the previous month, according to National Association of Realtors (NAR). November existing home sales were revised down slightly to 6.46 million from 6.48 million. The number of sales decreased by 7.1% compared to the same month a year ago. The results were far more disappointing than analysts’ expectations of a 0.5% month-over-month drop to 6.43 million units, according to Bloomberg consensus estimates.
For the full year, 6.12 million units were sold in 2021, the most since 2006 and up 8.5% from the previous year, when activity was fueled by pent-up demand from COVID-19 lockdowns, according to the NAR. Before COVID, there were 5-5.5 million units sold per year. December’s results could have been anticipated as pending home sales fell in November, which is an indicator of future sales activity.
“December saw sales pull back, but the pullback was more a sign of supply constraints than an indication of weakening housing demand,” said Lawrence Yun, chief economist at NAR, also attributing the slowdown of the last month of 2021 to rising mortgage interest rates. , “which can produce mixed results. Some people want to hurry and buy, others want to wait to buy. Rising rates will reduce home sales.”
“Mortgage rates have risen again as the 10-year U.S. Treasury yield rose and financial markets adjusted to expected monetary policy changes that will fight inflation,” said Sam Khater, chief economist of Freddie Mac, in a press release. “Due to rising mortgage rates, buying demand has eased slightly ahead of the spring home buying season. However, supply remains close to historically tight levels and house prices remain high, keeping the market competitive.
Total housing inventory at the end of December was 910,000 units, down 18.0% from November and 14.2% from a year ago – the lowest level since 1999, when NAR began tracking inventory for all housing types (NAR began tracking inventory for single-family homes in 1982). Unsold inventory is at 1.8 months supply at the current selling rate, compared to 2.1 months in November and 1.9 months in December 2020.
“December sales volumes have been plagued by a simple truism: it’s very difficult for sales to grow significantly when there just aren’t many products available to buy,” Zillow senior economist Kwame Donaldson said in a statement. “Existing home sales came down to earth in December after a surprisingly strong fall, and the seasonally adjusted annual sales rate ended 2021 below the level recorded at the end of 2020 – the first time since 2018 that the sales rate of existing homes closed the year below its starting point.”
The median existing home price for all housing types in December was $358,000, up 15.8% from December 2020 ($309,200) as prices rose in every region. The South experienced the highest rate of appreciation. The further acceleration in price increases from the teen low in December implies that demand is still strong as supply continues to shrink, Yun said.
“Although mortgage rates are rising, they wouldn’t have affected the December data and may not have had much of an effect on sales as long as they remain well below the historical average,” Robert said. Frick, a business economist at the Navy Federal Credit Union. , in a report. “Unfortunately, the tight market continues to drive home prices up, with the median price up 15.8% year-on-year. Every month fewer first-time buyers, in particular, can afford a house.”
Prices were pushed higher by the sale of homes in the upper price range while sales of homes in the lower price range fell or remained unchanged. The number of homes sold above $1 million rose 38% from last month, while sales of homes between $750,000 and $1 million rose 32%, according to NAR.
“Despite lagging behind year-ago levels, existing home sales hit their 4th consecutive month at over 6 million in December, ending 2021 on a relatively high note. inflation concerns gave homebuyers a good reason to stay in the market in December: the potential opportunity to close a home before prices and mortgage rates rise further,” said Realtor.com’s chief economist. , Danielle Hale, in a statement ahead of the results.
Hale added: “With home inventory dwindling and prices rising, finding the right home that’s still within budget continues to be the hardest part of the real estate journey – and means the supply of homes for sale remains a key driver of sales activity.This is exemplified by trends in existing home sales during 2021, which started strong before dipping into the traditionally busy spring and summer months, when there were few homes available for sale, then rebounded in the fall as more new sellers meant more options for eager buyers to jump on.
Amanda Fung is a staff writer at Yahoo Finance.
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