Existing Home Sales Slide to Cap Biggest Annual Drop Since 2008

Sales of previously owned US homes fell in December to the slowest pace in over a decade, capping one of the housing market’s worst years on record amid a rapid jump in mortgage rates.

Contract closings decreased 1.5% to an annualized pace of 4.02 million last month, the slowest rate since 2010, the according to data from the National Association of Realtors out Friday. The median estimate in a Bloomberg survey of economists called for sales to drop to 3.95 million.

The figures wrap a tumultuous year for the housing sector, in which transactions fell for a record 11 straight months. For all of last year, slightly more than 5 million existing homes were sold — a drop of 17.8% from 2021, the biggest annual slide since 2008.

The Federal Reserve’s most aggressive tightening campaign in a generation sent mortgage rates soaring in 2022 to the highest level in two decades, sidelining many prospective buyers.

While borrowing costs have come off their peak in recent weeks, helping to boost builder sentiment, the outlook is still shaky. Separate data out this week showed new home construction declined in 2022 for the first time since 2009 while applications to build, a proxy for future construction, also fell in December.

“December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates,” Lawrence Yun, NAR’s chief economist, said in a statement. “However, expect sales to pick up again soon since mortgage rates have markedly declined after peaking late last year.”