(Bloomberg) -- Home sales in the U.S. slumped in December, while prices inched up slightly, marking the smallest annual increase since the end of the last housing crash in 2012, according to data from brokerage Redfin.
The median home price rose to $289,800 in December, a gain of 1.2 percent, the slowest monthly pace since March 2012. Sales dropped by almost 11 percent, the biggest decline for any month since 2016, Redfin said. Previously hot metropolitan areas are cooling fast. Prices dropped 7.3 percent in San Jose, California.
The property market, which was surging for years as buyers fought for a limited supply of homes, is softening as inventories start to increase and buyers take more time. The jump in mortgage rates last year added to housing's underlying affordability problem, putting an end to the era of rampant bidding wars.
“It was like hitting the brakes when you're going over the speed limit,” Redfin Chief Economist Daryl Fairweather said of the slowdown. “You can't have prices growing faster than wages year after year.”
The big question the report doesn't answer is whether a recent drop in mortgage rates will fuel a rebound in sales. Redfin's data, which covers many large metropolitan areas, represents closed sales. Buyers likely signed contracts in November for most December sales. While rates for 30-year mortgages peaked at 4.94 percent in November, climbing a percentage point since the start of 2018, they've since fallen to 4.45 percent.
To contact the reporter on this story: Prashant Gopal in Boston at pgopal2@bloomberg.net
To contact the editors responsible for this story: Debarati Roy at droy5@bloomberg.net, Rob Urban
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