(Bloomberg) -- Depressed housing inventory curbed U.S. sales of previously owned homes at the end of the strongest year since 2006, and a recent spike in mortgage rates risks a further tempering of purchases.

Contract closings decreased 4.6% in December from the prior month to an annualized 6.18 million, figures from the National Association of Realtors showed Thursday. Still, sales climbed to 6.12 million last year, while home prices appreciated by the most since 1999.

The December drop reflected both lean inventory and the start of a pickup in mortgage rates that have since climbed to the highest level since March 2020. The number of properties for sale last month was the lowest on record.

“Even as sales are falling, the fact that prices are showing this strength is showing that buyers are there. But the lack of inventory is hindering some of the sales activity,” Lawrence Yun, NAR’s chief economist, said on a call with reporters.

The median forecast in a Bloomberg survey of economists called for a 6.42 million annualized rate in December. 

The median selling price rose 15.8% in December from a year ago to $358,000. That compares with $354,400 in the prior month.

There were just 910,000 homes for sale last month, down 18% from a month earlier and 14.2% from a year ago. At the current pace it would take 1.8 months to sell all the homes on the market, also a record low. Realtors see anything below five months of supply as a sign of a tight market. 

Properties remained on the market for an average of 19 days last month, compared to 21 days a year earlier. Seventy-nine percent of homes sold in December were on the market for less than a month.

Cash sales represented 23% of all transactions last month and investors made up 17% of the market. First-time buyers accounted for 30% of sales in December.

Digging Deeper

  • Sales of previously owned single-family homes decreased 4.3% in December to a 5.52 million pace
  • Existing condominium and co-op sales fell 7% last month to 660,000
  • All regions posted sales decreases last month, led by the West and South
  • Homes costing less than $250,000 declined in December, while purchases of properties priced at least $500,000 increased
  • Existing-home sales account for about 90% of U.S. housing and are calculated when a contract closes. New-home sales, which make up the remainder, are based on contract signings and December data will be released on Jan. 26

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