Fair price, any house will sell. But sellers don’t want to set the right price for their homes.
By Wolf Richter for WOLF STREET.
It’s getting relentless: Sales of former homeowners’ homes, apartments and co-ops fell 1.5% in December from November, the 11th straight month of monthly declines, and 34% year-on-year the other, at a seasonally adjusted annual sales rate of 4.02 million homes, roughly matching the May 2020 lockdown trough, and beyond, the lowest since the depth of the housing crisis 1 in 2010, according to the National Association of Realtors today.
At the right price, just about any home will sell, but sellers don’t want to price their homes right. And would-be sellers are sitting on their vacant homes, hoping for a quick end to this downturn, or they’re putting it on the rental market or trying to turn it into a vacation rental, rather than face the reality of a bubble. mind-blowing real estate that erupted loudly (historical data via YCharts):
actual sales in December — not the “seasonally adjusted annual rate” of sales — fell 36.3% year-over-year to 326,000 homes (compared to 513,000 homes a year ago), according to the NAR.
The median price of all home types whose sales closed in November fell for the sixth straight month to $366,900, down 11.3% from the June high. That decline reduced the year-over-year gain to just 2.3%, from a year-over-year gain of 16% in spring 2022.
Only part of this June-December price drop is seasonal: the average June-December drop in the six years before the pandemic was 5.8%, with a maximum drop of 6.4% and a minimum drop by 3.8%. This shows that the current drop of 11.3% is well beyond even the maximum seasonal drop.
Further confirmation that much of this decline was non-seasonal is provided by the rapid decline in the year-over-year price gain, falling to just 2.3% from 16% in December 2021 in spring 2022 (historical data via YCharts):
In some markets, the median price has plunged much further. For example, in the San Francisco Bay Area, the median price has fallen 30% from the April 2022 peak, and 10% year over year, according to the California Association of Realtors. But other markets lag behind to produce the overall national average.
Cash buyers, investors and second home buyers have retreated en masse. Cash sales fell 22% year-over-year to 92,000 homes (28% of 328,000 homes sold), from 118,000 in December 2021 (23% of 513,000 homes sold). In other words, cash-paying buyers also didn’t want to buy those overpriced homes, even though they didn’t have to worry about getting a high-rate mortgage.
Sales to individual investors or buyers of second homes plunged by 27% to 52,500 homes (16% of the 328,000 homes sold), compared to 71,800 in December 2021 (14% of the 513,000 homes sold). They too have withdrawn from this market.
Sales of single-family homes fell 1.1% in December from November, and 33.5% year-on-year, to a seasonally adjusted annual rate of 3.64 million homes.
Sales of condos and cooperatives fell 4.5% in December from November, and 38.2% year-on-year, to a seasonally adjusted annual rate of 420,000 units.
Sales fell in all regions, but the most dipped towards the West. Year-over-year percent change (NAR map of regions):
Active announcements jumped 55% from a year ago to 68,900 in December (active listings = total inventory for sale minus properties with pending sales). Just before the holidays, many sellers pull their homes off the market and then put them back on the market for the spring selling season. This happens every year; the active list starts to drop before Thanksgiving and only goes up in the spring (data via realtor.com):
Open listings, although up significantly from a year ago, are still relatively low as potential sellers are determined to wait out what they expect to be a brief ripple in the market, and in the meantime, they put their vacant houses on the rental market and they’re trying to make money by putting their vacant house up for vacation rental. And many are just sitting on their vacant homes that they hadn’t sold because they wanted to ride the market to the top with huge gains of 20% or 30% per year. But this show is over. And now?
Median days on marketbefore the frustrated seller takes the house off the market, or before the house is sold, increased to 67 days (data via realtor.com):
Price reductions: Active listings with price cuts hit a new high for any month of December in realtor.com data dating back to 2016: 25% of active listings in December 2022 had price cuts, compared to say 17 % in December 2019 before the pandemic.
December or January is usually the seasonal low point for price reductions. Rather than cut prices, many sellers are pulling their homes off the market and waiting for the spring selling season before putting them back up for sale. The fact that sellers reduce prices during the holidays to this extent shows that they are becoming a little more aggressive.
Hoping for a rapid reversal of this slowdown: This combination of plummeting sales, falling prices, rising active listings, days on the market before the home is removed or sold, increased active listings with price drops, but of still tight supply, indicates that many potential sellers are still hoping for a quick reversal of this downturn. And they let the vacant home wait for better days, or they put it on the rental market or try to turn it into a vacation rental, rather than face the reality of a jaw-dropping housing bubble that has noisily burst.
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