Sales of existing homes in 2021 reached their highest point in a decade and a half, but the market could be headed for a slowdown in 2022.
The National Association of Realtors said Thursday that existing-home sales jumped 8.5 percent in 2021 to a 15-year high of 6.12 million, the Wall Street Journal reported. Low interest rates and widespread remote work were some of the factors driving last year’s sales streak.
The hot market came with issues matching supply to demand, driving prices up. The median existing-home price increased to a record $346,900 in 2021, according to NAR data, up 16.9 percent year-over-year.
The market’s slowdown in late December came amid markedly low inventory. NAR reported existing-home sales dropped 4.6 percent month-over-month to a seasonally adjusted annual rate of 6.18 million, according to the Journal. That’s a 7.1 percent decline for December year-over-year.
“Buyers are there, but the lack of inventory is hindering some of the sales activity,” said NAR’s chief economist, Lawrence Yun.
To Yun’s point, NAR reported only 910,000 homes for sale at the end of December, the lowest level since the association began tracking inventory in 1999. There was a 1.8-month supply of homes on the market at the end of the year, another record low, as inventory dropped 18 percent from November and 14.2 percent year-over-year.
Builders trying to close the gap between supply and demand may be making progress. Housing starts gained 1.4 percent from November to December and residential permits jumped 9.1 percent. But labor shortages and supply chain issues continue to imperil construction pursuits.
Zillow senior economist Jeff Tucker forecast an “exceptionally frenzied” first quarter. However, the market could be due for a slowdown later in 2022, thanks to lack of inventory and rising interest rates. The Journal reported last week mortgage rates hit their highest level since March 2020.
[WSJ] — Holden Walter-Warner