• 3.78 million existing homes were sold in December (SAAR), down 1% from November and down 6.2% from December 2022, according to the National Association of Realtors (NAR).
• Total housing inventory at the end of December fell to 1 million units, NAR said, totaling 3.2 months of supply at the current monthly sales pace. Despite the decline in December, inventory is up 4.2% from a year ago.
• The median existing-home sales price in December was $382,600, 4.4% higher than a year ago.

What happened: Existing home sales fell again in December prolonging a more than two-year long slump. While housing activity tends to slow this time of year, a sudden and rapid increase in mortgage rates in October caused the housing market to take a bit of a pause.  December sales likely reflect homes that went under contract in the prior two months. 

What Zillow Senior Economist Orphe Divounguy thinks: Housing affordability remains the biggest challenge for many existing homeowners and potential homebuyers. Mortgage rates soared to the highest level in 23 years in October before easing at the end of the year. The uncertainty and the rapidly changing macroeconomic conditions likely caused many existing homeowners and prospective buyers to wait on the sidelines.

However, easing mortgage rates at the end of the year brought buyers – and some sellers – back into the market. The flow of existing homes onto the for-sale market has continued to improve on a year-over-year basis. Zillow data shows newly pending home sales – a leading indicator of existing home sales – improved from an annual drop of -4.6% in November to -0.7% in December suggesting home sales may have already found the bottom and could improve modestly in 2024.

Despite these improvements, the housing market remains supply constrained. The lack of existing homes on the market provides an opportunity for builders to fill the gap. Builders are offering incentives such as rate buy-downs to make the math work for prospective buyers.