White home in suburbs with brick sidewalk
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Inventory and time on the market increased while listing price growth moderated during December, signaling the housing market is continuing to normalize, according to the Realtor.com Monthly Housing Trends report. The normalization in the market suggests home buyers will have more options and more time to make decisions during their searches in the new year, Realtor.com says.

“In December, we saw both buyers and sellers pulling back as they continue to adjust to a challenging market,” says Danielle Hale, chief economist for Realtor.com. “Buyers started 2022 facing high home prices and limited inventories and ended the year with interest rates roughly double where they started. Despite significant cooling in sales in 2022, some indicators remain in high gear. Prices are still significantly higher and homes are selling faster compared to 2019 pre-pandemic levels.”

The supply of active listings for sale increased by 54.7% year over year in December, signaling continued hesitation from buyers faced with high mortgage rates. Forty-nine of the 50 largest metros recorded yearly active inventory gains in December. Only Hartford, Connecticut (-7.7%), saw a year-over-year decline in the number of for-sale homes.

Despite the increase on a year-over-year basis, the number of homes for sale remains 38.2% lower than the average inventory levels for 2017 through 2019. Both newly listed homes and pending listings declined on a year-over-year basis by 21% and 26.8%, respectively.

Among the 50 largest metros, the number of homes for sale increased nearly 75% compared with a year ago, with the most growth in active listings in the West (+110.2% on a year-over-year basis). However, no regions experienced year-over-year growth in new listings in December, with the greatest declines registered in the West (-32.5%), Northeast (-21.8%), and Midwest (-19.3%).

While prices remain elevated compared with pre-pandemic levels, growth in asking price slowed to a single-digit pace in December for the first time since December 2021. Despite the price moderation, the median list price in 2022 was up an average of 13.4% compared with the previous year.

“Although demand has softened compared to last year, pushing home price growth into single-digit territory for the first time in 12 months, moderation in home price growth may encourage more buyers to return to the market in the months head, and may also be welcome news for sellers aiming to sell and buy at the same time,” Hale says. “Affordability will remain a challenge, and buyers will want to keep a close eye on their potential mortgage payment.”

According to Realtor.com, higher rates and home prices in December compared with December 2021 increased the typical mortgage payment by nearly $750 each month. Realtor.com projects rates will climb higher early in 2023 before falling in the second half of the year.

Due to the increase in homes for sale on the market and softening buyer demand, homes spent more time on the market in December compared with the prior year. In December, the typical home spent 67 days on the market, 11 days longer than December 2021. However, homes still sold faster than pre-pandemic levels, when homes typically spent 83 days on the market, according to Realtor.com. Realtor.com forecasts midsized markets that offer better affordability and solid jobs and economies may “continue to be attractive to home shoppers” in 2023, especially among prospective buyers with the flexibility to relocate.