National Association of Realtors data released Friday (19 January) shows that the number of contracts closed decreased by one percent from a year earlier, and now stands at 3.78 millions annualised. In 2023, the sales will drop to their lowest level in over 20 years.

Last month, there were only one million homes available for sale, the lowest number since March. According to the current sales rate, it would take about 3.2 months for all the properties listed on the market to be sold. Realtors view anything below five-months of supply as an indication of a tightening resale marketplace.

The housing sector, which is one the most sensitive to interest rate changes in the economy, suffered last year when the Federal Reserve raised the borrowing cost to its highest level since early 2000s.

In the last few months, policymakers are focusing on lowering mortgage rates. Rates have fallen from their peak in October of 8 per cent. However, many homeowners still hesitate to list their homes or move until the rates are further reduced.

Lack of inventory keeps prices high. The median price of sales in December was US$382,600. This is a significant increase from the previous year. Prices reached US$389,000.00 in 2023.

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Some 56% were listed for less than one calendar month. In November, properties were on the marketplace for 25 days.

According to new estimates, it is likely to take several years before the resale sales market reaches the level of pre-pandemic. The high cost for homes compared to people’s earnings was cited as the reason.

Most of the sales come from existing homes, and are based on contracts that have been closed. Data on home sales for the new year, which includes contract signings, will be available next week.

The US housing market suffered its worst year since nearly 30 years in December.

The last month’s sales appear to be the bottom of the market before it will inevitably turn higher in the next year. Mortgage rates are lower now than just two month ago. In addition, more inventory should be on the market over the next few months.

Data from this week show that activity has picked up. Mortgage applications for home buying have risen to the highest levels since July. The mood of homebuilders is also improving, which could help increase the number of new homes.