Many prospective U.S. home buyers stayed away from the market last year as prices climbed and inventory sank, pushing existing home sales to their lowest level in nearly 30 years.
Last year, existing home sales — including single-family homes, townhomes, condominiums and co-ops — dropped to 4.09 million, the lowest level since 1995 when these sales totaled 3.85 million, according to a new National Association of Realtors (NAR) report. The median sale price last year hit a record high of $389,800, the association said in the report.
Low inventory and affordability were the primary reasons for the drop, NAR said. But while total housing inventory in December sat at just 1 million units — the equivalent of 3.2 months' supply — it was a 4.2% improvement from the prior year when inventory was only 960,000 units.
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"Despite sluggish home sales, 85 million homeowning households enjoyed further gains in housing wealth," Lawrence Yun, NAR chief economist, said in a statement. "Obviously, the recent, rapid three-year rise in home prices is unsustainable. If price increases continue at the current pace, the country could accelerate into haves and have-nots.”
Yun pointed to mortgage rates, which are "meaningfully lower" than they were two months ago and said that more inventory is due to enter the market in coming months. Freddie Mac put the average 30-year fixed rate mortgage at 6.6% as of January 18, down from 6.66% the prior week but up from 6.15% one year ago, NAR said.
Demand is improving
The NAR report comes as recent data from the Mortgage Banker Association (MBA) shows that mortgage demand slightly improved for the week ending January 19. This was the third consecutive week of improvement despite still-high mortgage rates, MBA said.
“More folks are trying to get a head start before the beginning of the spring selling season by applying early for a mortgage,” the Kiplinger Letter’s housing editor Rodrigo Sermeño said in a statement about the MBA data. “With mortgage rates falling further this year, things should continue to look better for buyers.”
Ways to shop for low mortgage rates
If you’re looking to buy a home, there are a number of ways to help you get the best 30-year mortgage rates. These include increasing your down payment, raising your credit score, shopping around to get quotes from multiple sources, and considering an adjustable-rate mortgage.
In addition, the Consumer Financial Protection Bureau's (CFPB) "Buying a House" webpage provides a tool to help in the homebuying process.
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