Home sales dropped by 17.8% last year in biggest drop since 2008

REAL ECONOMY BLOG | January 20, 2023

Authored by RSM US LLP

Sales of existing homes fell for the 11th straight month in December, finishing their worst year since 2008, the National Association of Realtors reported on Friday.

Still, there is some room left for sales to fall further as the Federal Reserve has signaled that it will continue to tighten monetary policy.

December’s sales declined by 1.5% to 4.02 million units annualized. That brought the total number of units sold last year to 5.03 million, 17.8% lower than in 2021.

Monthly sales blew past the pandemic’s bottom of 4.07 million units in May 2020 as the housing market continued to stumble.

Most of the decline was driven by falling demand as the impact of rising mortgage rates has set in. As a result, price growth continued to decelerate in December, falling to only 2.3% year-over-year, the lowest since May 2020.

On a non-seasonally adjusted basis, median prices dropped for the sixth straight month to $366,000, highlighting how weak the housing market has been in the second half of the year.

On the other hand, a fall in supply also contributed to the lower sales. There were 2.9 months of supply at December’s selling rate, down from 3.3 months in November.

The decline in sales came from both single-family homes and condos, which fell by 1.1% and 4.5% on the month, respectively. Sales fell in all regions fell except for the West.