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Existing home prices are down 11% from their peak. Sales lock hit low. Money buyers and investors pull back heavily

Priced right, any home will sell. But sellers aren’t looking to price their homes right.

By Wolf Richter for WOLF STREET.

This is getting relentless: Sales of previously owned homes, condos and co-ops fell 1.5% in December from November, the 11th straight month of monthly declines and 34% year-over-year, for a seasonally adjusted annual rate of sales of 4.02 million homes, roughly matching the May 2020 lockdown minimum, and in addition the lowest since the depth of Housing Bust 1 in 2010, according to the National Association of Realtors today.

With the right price, almost every home will sell, but sellers don’t want to price their homes right. And potential sellers are sitting in their empty homes, hoping for a quick end to this crisis, or are putting them on the rental market or trying to leverage them as vacation rentals, rather than dealing with the realities of a housing bubble. hallucinatory that burst loudly (historical data via YCharts):

current sales in December — not the “seasonally adjusted annual rate” of sales — was down 36.3% year-over-year to 326,000 households (from 513,000 households a year earlier), according to NAR.

the average price of all types of homes whose sales closed in November fell for the sixth straight month to $366,900, down 11.3% from their June peak. That drop reduced the year-over-year gain to just 2.3% from a 16% year-over-year gain in spring 2022.

Only part of this June-December price drop is seasonal: the average June-December drop over the six years before the pandemic was 5.8%, with a maximum decline of 6.4% and a minimum decline of 3. 8%. This shows that the current decline of 11.3% goes well beyond the maximum seasonal decline.

Further confirmation that much of this decline was not seasonal is provided by the rapid shrinkage of the year-over-year price gain to just 2.3% from 16% in December 2021 through Spring 2022 (historical data via YCharts) :

In some markets, the average price has dropped much more. For example, in the San Francisco Bay Area, the average price is down 30% from its April 2022 peak and 10% year-over-year, according to the California Association of Realtors. But other markets are lagging behind to produce the overall national average.

Cash Buyers, Investors, and Second Home Buyers Pulled Back Massively. Cash sales are down 22% year-over-year to 92,000 homes (28% of 328,000 homes sold), down from 118,000 in December 2021 (23% of 513,000 homes sold). In other words, cash-paying buyers also didn’t want to buy these overpriced homes, even though they didn’t have to worry about getting a high-rate mortgage.

Sales to individual investors or second home buyers were down 27% to 52,500 homes (16% of 328,000 homes sold), from 71,800 in December 2021 (14% of 513,000 homes sold). They also moved away from that market.

single family home sales fell 1.1% in December from November and 33.5% year-on-year, for a seasonally adjusted annual rate of 3.64 million homes.

Sales of condominiums and cooperatives it fell 4.5% in December from November and 38.2% year-over-year to a seasonally adjusted annual rate of 420,000 units.

Sales dropped in all regions, but delved further into the West. Year-to-year percentage change (NAR map of regions):

active listings jumped 55% year-over-year to 68,900 in December (active listings = total inventory for sale minus properties pending sales). Just before the holidays, many sellers take their homes off the market and put them back on the market for the spring selling season. It happens every year; active listing starts to drop before Thanksgiving and doesn’t go up again until spring (data via realtor.com):

Active listings, while up hugely from the previous year, are still relatively low as potential sellers are determined to wait out what they hope will be a brief surge in the market and are putting their vacant homes on the rental market in the meantime. and they’re trying to make some money by putting their empty house up as a vacation rental. And many are just sitting in their empty houses that they didn’t sell because they wanted to ride the market all the way to the top with huge gains of 20% or 30% a year. But that show is over. And now?

Average days on the marketbefore the frustrated seller takes the house off the market, or before the house is sold, it has risen to 67 days (data via realtor.com):

Price reductions: Active listings with price reductions hit a new record for any December in realtor.com data since 2016: 25% of active listings in December 2022 saw price reductions, up from, say, 17% in December 2019 pre-pandemic .

December or January is usually the seasonal low point for price cuts. Rather than lowering prices, many sellers take their homes off the market and wait for the spring selling season before relisting. The fact that sellers are slashing holiday prices to this extent shows that they are getting a little more aggressive.

Hoping for a quick reversal of this crisis: This combination of falling sales, falling prices, an increase in active listings, an increase in days on the market before the home is foreclosed or sold, an increase in active listings with price cuts but still tight supply, indicates that many sellers in potential still expect a quick reversal of this recession. And they’re leaving the house empty waiting for better days, or they’re putting it on the rental market or trying to make it a vacation rental instead of dealing with the reality of a mind-blowing house. bubble that burst noisily.

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