Regionally, on a monthly basis, sales were unchanged in the Northeast and down 4.3% in the Midwest. Sales fell 2.8% in the South but rebounded 7.8% in the West. On an annual basis, sales decreased in all regions.
The number of home closings is based on contracts that were likely to be signed in late October and November, when mortgage rates were much higher than they are now. The average interest rate on a 30-year fixed loan rose to about 8% in October before falling to the 7% range in November. It now stands at 6.89%, according to Mortgage News Daily.
“Last month’s sales appear to be the bottom before they inevitably rise in the new year,” Lawrence Yun, chief economist at NAR, said in a statement. “Mortgage rates are much lower than they were just two months ago, and more inventory is expected to come to market in the coming months.”
Inventory fell 11.5% from November to December, but was up 4.2% from December 2022. There were 1 million homes for sale at the end of December, which means a 3.2-month supply at the current sales pace. The 6-month offer is balanced between buyer and seller.
Supply shortages continue to reheat home prices. The median price of a home sold in December was $382,600, an increase of 4.4% from December 2022. This is the sixth straight month of year-over-year price gains. The average price for the entire year was $389,800, a record high.
Homes stayed on the market longer in December, an average of 29 days, compared to 25 days in November. The share of all-cash sales rose to 29% from 27% in November. Individual investors, who make up a large share of total cash sales, bought 16% of homes, down from 18% in November.
This decline in activity by investors could be a bright spot for buyers. Rising home prices and higher financing costs have led to a decline in the number of home purchases by investors for all of 2023, according to a recent report. Recent Realtor.com study
“As rents continue to decline and more multifamily homes enter the rental market, investors may continue to move more cautiously in the housing market,” said Danielle Hale, chief economist at Realtor.com. “This means a reduced source of competition for potential first-time homebuyers who are approaching the 2024 market with optimism despite the challenge of trying to buy a home at a below-average price, a price that investors often target as well.”
First-time buyers are still struggling, making up just 29% of December sales, down from 31% the previous year. Historically, they make up 40% of the market.