Home prices climb 16.9 percent in December, highest ever

The median home sales price went up to $346,900 last year, up 16.9 percent from 2020 and the highest increase on record since 1999, according to the National Association of Realtors.

The previous year, 6.12 million homes were sold, up 8.5 percent, and the strongest year since 2006.

Lawrence Yun, NAR's chief economist, said that was a sizable wealth gain for homeowners across the country. The housing market has seen a spectacular performance this year, with sales rising and prices rising. The inventory is at an all-time low, as reported by CNN.

The consumer should be prepared for some increases in mortgage rates this year, Yun cautioned. I expect home prices to grow more moderately in 2022, by 3 percent to 5 percent, and then similarly in 2023, as more supply comes to the market. Because of scarce inventory, sales of existing homes - which include single-family homes, townhomes, condominiums and co-ops - decreased by 4.6 percent in December compared to November, and 7.1 percent from a year ago.

December saw sales retreat, but the pullback was more a sign of supply constraints than an indication of a weakened demand for housing, said Yun.

The low inventory has also reduced the sales of homes in affordable price ranges.

The upper end of the market is moving along, Yun said. There is not enough inventory or homes being pushed into the higher price brackets at the lower end. Yun noted that more homes are expected to come onto the market during the spring home selling season. New home construction in December grew, according to the U.S. Commerce Department on January 19, and good news came from the U.S. Commerce Department.

Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, said that new supply is needed because move-up buyers purchasing new homes will free up existing inventory for the wave of first-time buyers.

With fewer than one million houses on the market at the end of December, prices continued to climb as buyers raced against the clock to secure low mortgage rates on those homes for sale.

Although sales are falling, prices are rising, showing demand is still there, Yun said.

In November, the share of first-time buyers fell to just 26 percent of all buyers. The share of first-time buyers returned to 30 percent in December.

There was a surge in first-time buyers at the end of the year, Yun said. With mortgage rates predicted to rise in 2022, it's likely that a portion of December buyers were intent on avoiding the inevitable rate increases.