By Mark Bigelow

The National Association of REALTORS® (NAR) has recently released its report on existing home sales for December 2023, and the numbers reveal a complex landscape. Let's dive into the data and explore what these trends could mean for buyers, sellers, and the real estate market as a whole.

A Dip in Sales, but Hope on the Horizon

According to the NAR, existing home sales in December retreated, with a 1.0% decrease from November, bringing the seasonally adjusted annual rate to 3.78 million. However, this slight decline may not be cause for alarm. NAR Chief Economist Lawrence Yun believes these numbers represent the bottom before an anticipated upswing in the new year. Why? One word: mortgages.

Mortgage rates have significantly dropped in the past two months, making homeownership more accessible for many. Additionally, the promise of increased inventory entering the market in the coming months suggests a potentially brighter future for buyers.

The Year-Over-Year Picture

Comparing the December 2023 figures to the same period in the previous year reveals a 6.2% decrease in sales. It's important to note that this dip in sales, while significant, isn't necessarily an indicator of a downward spiral. The real estate market tends to fluctuate seasonally and can be influenced by various external factors. It's the long-term trends that provide a more accurate picture.

A Record High Median Price

One standout trend is the median home price, which reached a record high of $389,800 in 2023. This represents an increase of 4.4% from December 2022. All four regions in the United States posted price increases. While this might be good news for sellers, it's a reminder of the challenges facing prospective buyers, especially first-timers.

Housing Inventory

Housing inventory remains a key factor in the market's dynamics. At the end of December, there were 1 million housing units available for sale. This represents an 11.5% decrease from November but is up by 4.2% from the previous year.

Unsold inventory currently sits at a 3.2-month supply at the current sales pace, which is down from 3.5 months in November but up from 2.9 months in December 2022. These numbers indicate that while there's still room for improvement, there's also progress being made.

First-Time Buyers and All-Cash Sales

First-time buyers accounted for 29% of sales in December, down from 31% in November 2023 and December 2022. This slight dip might be attributed to the challenges posed by rising home prices. However, NAR's 2023 Profile of Home Buyers and Sellers reported a 32% annual share of first-time buyers, suggesting this group remains a significant part of the market.

All-cash sales increased to 29% of transactions in December, up from 27% in November 2023 and 28% in December 2022. Individual investors and second-home buyers, often associated with cash sales, purchased 16% of homes in December, down slightly from the previous month but consistent with the same period in the previous year.

Mortgage Rates

Mortgage rates averaged 6.60% as of January 18, 2024. While this is slightly down from the prior week, it's notably higher than the 6.15% rate from one year ago. This emphasizes the importance of seizing opportunities when rates are favorable.

Regional Variations

Real estate markets can vary widely by region, and this report is no exception:

  • In the Northeast, existing home sales remained unchanged from November but were down 9.6% from December 2022. Median prices in this region were up by 9.4% from the previous year.

  • The Midwest experienced a 4.3% decrease in existing home sales from the prior month and a 10.9% drop from last year. However, median prices increased by 5.9% compared to December 2022.

  • In the South, existing home sales descended by 2.8% from November, resulting in a 4.4% decrease from the previous year. Median prices in the South increased by 3.8% from one year ago.

  • Finally, the West enjoyed a 7.8% increase in existing home sales from the previous month but still saw a 1.4% decline from the previous year. Median prices in the West were up 4.8% from December 2022.

In conclusion, the December 2023 NAR report paints a mixed picture of the real estate market. While some challenges persist, such as rising home prices and a decline in first-time buyers, there are also promising signs, like lower mortgage rates and a potential influx of inventory. As always, the real estate market is influenced by a myriad of factors, and buyers and sellers need to stay informed and adapt to changing conditions.