U.S. existing home sales soared to a 15-year high in 2021 fueled by low interest rates and remote work, which boosted a competitive housing market, the National Association of Realtors (NAR) announced Thursday.
Home sales totaled 6.12 million in 2021, representing an 8.5% increase from 2020 and the highest level since 2006, according to the NAR. The inventory of unsold homes as of December 2021, 910,000, the lowest figure since January 1999.
“December saw sales retreat, but the pull back was more a sign of supply constraints than an indication of a weakened demand for housing,” Lawrence Yun, chief economist at the NAR, said in the report. “Sales for the entire year finished strong, reaching the highest annual level since 2006.”
As the inventory of unsold homes dropped to a record low, the median existing-home price surged to an all-time high of $358,000, a nearly $50,000 year-over-year increase, according to the NAR report.
Sales are expected to slow in the next few months as interest rates rise, but growing unemployment and stricter underwriting rules will keep the housing market out of danger, Yu said. Rates will stay below 4% by the end of 2022, and wages will remain consistent amid the tightening labor market, he said.
“This year, consumers should prepare to endure some increases in mortgage rates,” Yun said. “I also expect home prices to grow more moderately by 3% to 5% in 2022, and then similarly in 2023 as more supply reaches the market.”
First-time homebuyers made up 30% of the sales in December 2021, a 26% month-over-month increase but a 31% dip from December 2020, according to the NAR.
“There was a significant surge in first-time buyers at the end of the year,” Yun said. “With mortgage rates expected to rise in 2022, it’s likely that a portion of December buyers were intent on avoiding the inevitable rate increases.”
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