CHICAGO, Illinois: The real estate market saw a boom last year, with the median home sales price soaring to $346,900 in 2021, up 16.9 percent from 2020 and the highest increase on record going back to 1999, according to the National Association of Realtors.
Some 6.12 million homes were sold, up 8.5 percent from the previous year, and the strongest year since 2006.
While that translated to bad news for would-be buyers, a typical homeowner saw profits of $50,200, due to the increased median price from 2020 to 2021.
"That is a sizable wealth gain for homeowners across the country," said Lawrence Yun, NAR's chief economist. "The housing market has seen a spectacular performance this last year, with sales rising and prices rising. But inventory is at an all-time low," as reported by CNN.
"This year, consumers should prepare to endure some increases in mortgage rates," Yun cautioned. "I also expect home prices to grow more moderately, by 3 percent to 5 percent in 2022, and then similarly in 2023 as more supply reaches the market."
Because of scarce inventory, sales of existing homes -- which include single-family homes, townhomes, condominiums and co-ops -- dropped 4.6 percent in December compared to November, and 7.1 percent from one 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. "But at the lower end, there is not enough inventory or some homes are being pushed into the higher price brackets."
More homes are expected to come onto the market during the spring home selling season, Yun noted. And good news also came from the U.S. Commerce Department on January 19, reporting that new home construction grew in December.
"This new supply is clearly needed, as move-up buyers purchasing new homes will free up existing inventory for the wave of first-time buyers," said Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, according to CNN.
With fewer than one million homes 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.
"Even as sales are falling, prices are rising, showing that demand is still there," Yun said.
In November, the share of first-time buyers fell to just 26 percent of all buyers. But in December, the share of first-time buyers returned to 30 percent.
"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."