Housing prices peaked last year

The real estate market took a downward turn in 2022, as rising interest rates quickly slowed the frenzied sales activity seen the previous year - but housing prices still reached record highs.
The median home sale price in 2022 was $386,300, up 10.2 percent from 2021 and the highest on record, according to data from the National Association of Realtors released Friday.
Meanwhile, home sales had their weakest year since 2014, with 5.03 million homes sold, down 17.8% from the previous year. It was the biggest annual decline in sales since 2008, when the market was in the midst of the housing crisis.
Sales of existing homes - which include single-family homes, townhomes, condominiums and co-ops - fell for the 11th month in a row in December, even as mortgage rates that were above 7% in November fell slightly. Buyers have avoided the market because of stubbornly high prices and rates are still double what they were the year before.
In December, sales decreased by 1.5% from November and decreased by 34% compared to last year. All regions of the country saw declines in sales from year to year, and three regions saw declines from month to month, with the West unchanged.
But prices continued to rise in December, with a median price of $366,900, up 2.3% from last year, which is the smallest price increase since the lockout period in May 2020. The price increase marks more than a decade of year-over-year monthly increases.

"December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates," said Lawrence Yoon, NAR's chief economist. "However, expect sales to pick up again soon, as mortgage rates have fallen significantly after peaking at the end of last year."

'Transition year' for real estate

After the real estate boom of 2021, fueled by some of the lowest mortgage rates on record, the rise in real estate rates of 2022 suppressed demand and slowed home price growth. Now, the housing market is moving into something closer to normal in the coming year, experts say.
"After the boom in sales in 2021, 2022 was a transitional year in which sales dropped considerably," Yun said. "We know there are concerns about the decline of the housing market and sales have fallen, but prices have risen for the year."
While the 10% increase in median home prices over the year was less than the 17% annual increase in 2021, month-to-month price increases moderated during 2022 with an annual price increase of 15.4% in January tapering off to a 2.3% increase in December. from the previous year.
"The December price increase is close to 0%, which means that half of the country is seeing some kind of price decreases and the other half is seeing price increases," Yoon said. Areas where prices had the biggest jumps in recent years - Phoenix; Austin, Texas; And Las Vegas - they are also places where prices drop the most.
From the end of pre-Covid 2019 to the end of 2022, median prices jumped 42%, Yoon said, translating to a $114,000 increase in housing wealth for the typical homeowner.
But for those who do not own a home, he added, housing prices have fallen much faster than income. This poses affordability challenges for many buyers.
December's existing home sales report hit the losing trifecta of lower sales, lower inventory and higher prices, said Robert Frick, corporate economist at Navy Federal Credit Union.
The only bright spot, according to him, was that apartment prices in December only increased by 2.3% compared to a year earlier.
"In many markets, we are seeing home prices come down from inflated levels, which is an opportunity for some potential buyers," Frick said. "However, while mortgage interest rates have dropped a full percentage point to about 6%, this level is still too high to encourage more listings and much more shopping."

Low inventory still frustrates home buyers

While inventory in December was up from a year ago, total housing inventory is still below XNUMX million units, which is historically low.
Properties typically stayed on the market for 26 days in December, compared to 24 days in November and 19 days in December 2021, according to NAR. More than half of the homes sold in December 2022 were on the market for less than a month. It is still, historically, a fast market, without an abundance of available homes.
The inventory of homes for sale remains stubbornly low as many potential sellers are reluctant to part with the ultra-low mortgage rates they bought or financed for the past few years.
As of the third quarter of 2022, the vast majority of mortgages available are at or below 6%, according to Mark Fleming, First American's chief economist.
"This leaves many existing homeowners in a position where it will cost more to borrow the same amount of money they owe on their current mortgage, preventing them from listing their home for sale and adding supply to the market," Fleming said.
"The good news is that the inventory of new homes is on the rise, and the overall inventory usually increases towards the spring season," he said. "The residential housing market suffered a deep freeze in the winter months of 2022, but there is reason to believe it will begin to thaw as the spring home buying season approaches."

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