Home Sales Data Presents Mixed View of Market

Which way is up? That’s a question that could be asked in the face of two seemingly contradictory reports on home sales in December 2023.

One report, from Redfin, says pending home sales rose 4.1% month over month in December. The other, from the National Association of Realtors, says existing home sales fell one percent in December.

The difference could be in the definition of a sale.

Redfin communications director Angela Cherry pointed out that the company’s report refers to pending sales – the total number of homes that went under contract, meaning the seller accepted an offer from a buyer, during a given time period of no longer than 90 days. She said the Redfin data captures closed sales of existing plus new construction homes.

NAR defines existing home sales as completed transactions that include single-family homes, townhomes, condominiums and co-ops, and don’t include new single-family home sales figures based simply on contracts or the acceptance of a deposit.

By Redfin’s definition, pending home sales rose 4.1% month over month in December to the highest level in over a year on a seasonally adjusted basis. Compared to the previous December, sales were up 5.9% — the biggest increase since June 2021. Active listings – the total number of homes for sale – were up 3.1% from November, but down 5.1% year over year. New December listings rose 0.1% from the prior month.

January sales, however, have slowed, likely due to severe winter weather.

In contrast, the NAR reported that December saw existing home sales fall in the Midwest and South, rise in the West and stay level in the Northeast. Year-over-year, all regions of the country suffered sales declines but price rises.

Total existing-home sales fell 1% from November to December and slipped 6.2% from the prior December’s 4.03 million to 3.78 million. The 4.9 million homes sold during 2023 marked a low point not reached since 1995.

Single-family homes sales fell to an annual rate of 3.4 million in December, down 0.3% from 3.41million in November and 6.1% from 2022, according to NAR. Existing condo and co-op sales of 380,000 in December were down 7.3% from November and the prior year.

There are some things both reports agree on. Mortgage rates have fallen – something Redfin said attracted buyers and brought some sellers cautiously into the market. Redfin said the dip from 7.44% in November to 6.82% in December was the biggest monthly drop since 2008. The reports also agree that home prices have risen, in some cases to record highs. All four regions of the country were affected.

NAR found the median price for an existing home was $389,800 in 2023 – the highest ever. The median existing condo price in December 2023 was $343,800 – 8.2% higher than the previous year’s $317,700 – while the median price for all housing types was $382,600, 4.4% higher than the previous December.

Redfin reported the median U.S. home sale price at $403,714 in December, 1.1% lower than in November but 4% higher year over year. Though homebuyer demand is one factor, “the primary driver of price increases is America’s persistent housing shortage of homes for sale, which is fueling competition in some cases,” Redfin stated.

“The recent, rapid three-year rise in home prices is unsustainable,” said NAR chief economist Lawrence Yun. “Creating a path towards homeownership for today’s renters is essential. It requires economic development and income growth and, most importantly, a steady build up of home construction.”

Redfin also noted a resumption of bidding wars, but on a much more limited scale than during the pandemic. “Instead of offering one or two hundred thousand dollars over the asking price, competitive buyers are offering 3% to 5% over.”

The NAR found 56% of homes sold in December were on the market for less than a month. First-time buyers accounted for 29% of December sales. All cash sales made up 29%, investors and second-home buyers accounting for 16%. About 2% of transactions were distressed sales – foreclosures and short sales.

Both reports show some optimism about the future. “More folks are looking to have conversations about what they need to do to enter the market now that they’ve seen improvement in the market,” Redfin noted. “The latest month’s sales look to be the bottom before inevitably turning higher in the new year,” said Yun. “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear.”