Existing home sales dropped to their lowest level in nearly 30 years in 2023, according to a report from the National Association of Realtors (NAR), released Friday. In 2023, 4.09 million existing homes were sold, the fewest since 1995.
“Slow home sales in 2023 were accompanied by higher mortgage rates, with the average rate on a 30-year fixed rate mortgage hitting a 23-year high in early November. But we can’t blame high mortgage rates for the deficit in transactions last year. In reality, the demand for housing—and homeownership, in particular—has remained high, despite higher rates,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “Prospective homebuyers have been shut out of the market by a lack of inventory. If there had been more listings on the market in 2023, we would have had more home sales.”
A consequence of the tight inventory situation, the median sales price for an existing home rose to a record high of $389,800 in 2023. In December, the median sales price was $382,600, up 4.4% compared to a year ago.
“Despite sluggish home sales, 85 million homeowning households enjoyed further gains in housing wealth,” Lawrence Yun, NAR’s chief economist said in a statement. “Obviously, the recent, rapid three-year rise in home prices is unsustainable. If price increases continue at the current pace, the country could accelerate into haves and have-nots. Creating a path towards homeownership for today’s renters is essential. It requires economic and income growth and, most importantly, a steady buildup of home construction.”
Befitting a challenging year for the housing market, existing home sales closed out 2023 at a seasonally adjusted annual pace of 3.78 million units in December, down 1.0% drop from a month prior.
The monthly drop came after existing home sales rose 0.8% in November, breaking a five-month streak of declines.
On a yearly basis, existing home sales were down 6.2% in December.
Despite the grim numbers, Yun is optimistic.
“The latest month’s sales look to be the bottom before inevitably turning higher in the new year,” Yun said in a statement. “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”
Heading into 2024, there were 1 million existing home units on the market, representing a 3.2 month-supply at the current sales pace. Compared to a month ago, housing inventory was down 11.5% at the end of December, but it was up 4.2% from a year prior.
“Continued strength in the homebuilding sector will be important to adding to supply in 2024,” Sturtevant said in a statement. “But listings of existing homes will continue to remain low as current homeowners, many holding sub-three percent mortgage rates, will be reluctant to move.”
Regionally, existing home sales fell in two of the four regions month over month, with the Midwest (900,000 units), and the South (1.72 million units), falling 4.3% and 2.8%, respectively. The sales pace in the Northeast held steady at 470,000 units, while the sales pace rose 7.8% on a monthly basis in the West to 690,000 units.
On a yearly basis, all four regions also recorded decreases in the existing home sales pace, with the Midwest falling 10.9%, the South dropping 4.4%, the Northeast falling 9.6% and the West dropping 1.4%.
The Northeast also recorded the largest year over year price change, rising 9.4% from a year prior to a median sale price of $428,100.
