U.S. Housing Market December Recap: Market Improves with Rebound in Buyer Demand

Starting with the key housing market data in the Redfin report, the median sale price increased to $364,250, reflecting a gain of 4.5% compared to the same timeframe in 2022. This marks the most significant surge since October 2022. 

Redfin’s Median Sale Price chart shows nationwide data going back to 2020. The current median sale price stands at approximately $364,000, up $1,000 from the previous week and a notable increase from $349,000 at this time last year, representing a 4.5% YOY growth. 

The Redfin graph shows that prices tanked during the last half of 2022, whereas this year indicates only a seasonal decrease in prices. This seasonal fluctuation is one of the factors contributing to the rise in home prices in 2023. Also, this implies that 2023 will end with an overall gain in home prices ranging between three and five percent.

Redfin’s metro-level highlights section outlines areas where home prices have experienced notable increases and decreases. Metros witnessing the largest YOY growth in median sale prices include Anaheim, CA, leading with an 18.2% surge, followed by Newark, NJ at 17%, Fort Lauderdale, FL at 13.6%, West Palm Beach, FL at 13.2%, and Miami, FL at 12.6%. Notice that three of the top five markets are located in Florida.

In contrast, among the 50 most populous U.S. metros, three markets have experienced a decline in median sale prices compared to the previous 12 months. Austin, TX leads the nation with a -4% decrease, followed by Fort Worth, TX at -2.2%, and San Francisco, CA, down by -1.1%. This stands in stark contrast to previous years when these cities saw rising median sale prices. This indicates a shift where homebuyers are now unwilling to pay higher prices with increasing mortgage rates.

According to the Redfin key housing market data report, the average monthly mortgage payment for buyers seeking a medium-priced home with a 20% down payment is $2,401, assuming a 6.67% mortgage rate. This represents a $334 per month reduction or a 12.2% decrease compared to the all-time high set during the four weeks ending October 22nd. This current figure marks the lowest level since February 2023, attributed to seasonal declines in home prices and a 1.4% drop in mortgage rates over the past two months. 

This is welcome news for the U.S. housing market, and according to a December 28th Freddie Mac report, mortgage rates remain on a downward trend in 2024. According to Freddie Mac’s Primary Mortgage Market Survey (PMMS), a 30-year fixed-rate mortgage (FRM) averaged 6.61%, slightly lower than the 6.67% reported by Redfin one week earlier. At this time last year, the 30-year FRM averaged 6.42%. 

“The rapid descent of mortgage rates over the last two months stabilized a bit this week, but rates continue to trend down,” said Sam Khater, Freddie Mac’s Chief Economist. “Heading into the new year, the economy remains on firm ground with solid growth, a tight labor market, decelerating inflation, and a nascent rebound in the housing market.”

While lower mortgage rates are helping, a decrease in home prices is also needed to improve housing affordability and attract more buyers back into the market.

According to the Redfin report, pending home sales experienced a YOY decline of 4%, totaling 57,600—the smallest decrease observed since March 2022. In contrast, new listings saw a substantial surge, reaching 53,243, marking a YOY increase of 12.2%. This is the most significant rise since June 2021, although it’s important to acknowledge that new listings were falling at this time last year. And active listings decreased to 817,863, reflecting a YOY drop of 3.8%—the smallest decrease since June 2023. 

In terms of pending home sales, Dallas, TX saw the most significant increase at 8.5%, followed by Milwaukee, WI at 8.4%, Austin, TX at 5.1%, Orlando, FL at 5%, and Fort Worth, TX at 4.6%. Conversely, Providence, RI experienced the most substantial decline at -15.2%, followed by Virginia Beach, VA at -10.6%, Jacksonville, FL at -10.2%, West Palm Beach, FL at -10.2%, and Tampa, FL at -9.6%. Pending home sales increased in 14 out of the 50 largest metros.

New listings decreased in just ten of the 50 largest U.S. metros, meaning 40 metros are experiencing an increase in the number of new listings. Phoenix, AZ leads in new listings with a remarkable rise of 31.5%, followed by San Antonio, TX at 25.6%, Dallas, TX at 21.4%, Washington, D.C. at 20.6%, and Montgomery County, PA at 19.6%.

In contrast, new listings decreased the most in San Francisco, CA, falling by -25.7%, followed by Indianapolis, IN at -12.8%, Atlanta at -11.5%, Warren, MI at -6.4%, and Newark, NJ at -3.9%.

According to Redfin’s Pending Sales chart, pending home sales are down by 4% compared to 2022, but remain well below the figures from 2021. 

Just focusing on 2022 and 2023 in Redfin’s Weekly Housing Market Data graph (click on the “Pending Sales” tab), it becomes apparent that 2023 began with pending sales down by 29.6%. Despite the current lower number of signed contracts compared to the same period last year, pending home sales have risen compared to the initial and summer months of 2023 when they fluctuated between declines of 12 to 15%. Pending home sales are still somewhat constrained due to high mortgage rates.

According to the New Listings graph in Redfin’s report, new listings are up 12.2% YOY. This increase is partly due to the significant decline in new listings observed last year. The current number of new listings starkly contrasts with the summer months. 

On December 24th, there were approximately 53,000 new listings. This increase is noteworthy, especially given that this time of the year traditionally experiences a decline in new listings. If this upward trend in new listings continues, it has the potential to increase inventory levels, changing housing market dynamics in 2024.

Referencing the report’s Active Listings graph, as of December 24th, housing inventory is down 3.8% from 2022. However, active listings are higher compared to 2021, standing at approximately 818,000 compared to 695,000 homes for sale.

Inventory levels increased late in the 2023 season, with a gradual rise in active listings. In contrast, 2022 inventory levels spiked, ranging from approximately 619,000 in February to about 983,000 in August. 2022 began with approximately 660,000 active listings and ended with about 850,000, whereas 2023 began with approximately 820,000 and ended with around 817,000 active listings. 

So, inventory levels have remained relatively flat this year, a departure from the significant surge observed last year. The spike in active listings in 2022 caused home prices to tank in the second half of that year, and one of the reasons why home prices are still up by 4% YOY.

According to the Redfin report, the months of supply graph shows a national level of 3.6 months of supply over the past four weeks. Housing supply indicates how many homes are for sale on the market for homebuyers. This is the highest level since February when there was a 4.6-month supply on the market. The only other months that come close are June, with 2.5 months of supply, August with 3 months, and November with 3.5 months. 

Currently, there’s a slight seasonal decrease in supply. For example, in 2022, the months of supply increased throughout the year but then decreased in December. In order for home prices to experience a significant decrease, the months of supply would need to reach six or higher, indicating that inventory outweighs demand for homes.

As per the Redfin report, the days on market graph reveals that homes are selling with a median of 39 days on the market. Compared to the same period last year when it took 41 days, houses are now selling a bit faster. Days on the market are currently on par with 2020.

According to the Redfin report, the share of homes for sale with price drops graph shows that 5% of listings have reduced their asking price. This is higher than last year at this time when the ratio was 4.3%.

In the average sale price to final list price ratio graph, Redfin reported that homes sold for 98.5%, which is 1.5% below their final asking price. This is higher compared to homes sold last year at this time, when the ratio was 98%.

The primary takeaway is the increased number of new listings. If this trend continues, home prices could fall because a rise in supply would outpace demand, especially if mortgage rates decrease in the coming months. Listings are expected to climb as many homeowners are beginning to accept the fact that mortgage rates won’t substantially decrease anytime soon, prompting them to sell before a potential fall in home prices.

Housing affordability has become a key issue within the U.S. housing market. However, economic indicators point toward the cessation of rampant inflation and high mortgage rates in favor of a shift toward a buyer’s market. This shift includes more properties available, lower prices, and easier access for first-time homebuyers.

The Redfin data suggests that conditions are ripe for a decline in home prices, which should occur over the second and third quarters of 2024 when the home-selling season is most active. Buyers will certainly welcome this reprieve, as prices ending 2023 were up 3% YOY, and monthly mortgage payments were at an all-time high.

In the first quarter of 2024, existing home sales should be on pace for 4.1 million, up from an annual pace of 3.85 million in the fourth quarter of 2023. Redfin’s data indicates that home sales could reach a total of 4.5 million by the fourth quarter of 2024 as affordability improves and more homes saturate the market. 

Much of this is contingent on factors such as whether mortgage rates rise or fall, along with considerations such as higher unemployment and a possible recession, which can introduce economic and financial volatilities affecting the housing market. To that end, recent data suggests that the U.S. housing market is on the road to recovery, albeit an extended and expensive convalescence.