For a population of 330 million people, total housing inventory levels drop to 970,00 units breaking under 1 million in December, NAR reported on Friday. In the previous year, a decline from 6.5 million existing home sales in January to about 4 million in December resulted in a downturn in existing home sales in 2022.
We are now back at all-time lows in terms of total inventory levels. A remarkable event has just occurred in the U.S. housing market in what has been one of the most historic years in the industry’s history. The concept seems so simple, but some people still do not understand how a home is different from a stock. After you sell your home, you need a place to shelter your kids because they need a place to sleep.
The price of housing in the United States is low when compared with wages, and most homeowners will buy a home as soon as they sell their current one. By looking at housing from this perspective, the last four decades make sense. One period in which this did not occur was 2006-2011, when Americans faced having to sell, rent or become homeless due to financial difficulties. Between 1982 and 2023, everything else was normal except for that period.
Those who believe people sell to become homeless do not understand housing data because they have simply never looked at it. Sellers are also a demand factor, and what we saw after June of 2022 was that sellers called it quits earlier than usual in the year, resulting in a total of 5,030,000 existing home sales ending 2022.
A housing recession has struck as the Federal Reserve sought a housing reset. The rate of decline in housing activity has fallen at its fastest during COVID-19. We saw a decline in new listing data during that period. A decline in new listings in 2020 would be a double negative for the housing market, and we don’t want to see that continue this year.