Despite more sales and less inventory than typical years, home prices fell nearly 3% in November, perhaps signaling a shift toward balance.
The November housing market was unusual in many ways, but the end result was a drop in home sales prices that may foreshadow a more balanced market in 2022.
According to the latest RE/MAX National Housing Report, the national median sales price dropped 2.9% to $330,000 from October to November. This represents the largest drop since January 2020 and comes despite unusually high demand and low supply.
The price relief is welcome news for homebuyers, but hardly a sign of a cooling market. By several measures, November 2021 was unusually busy for housing.
“The market is roaring along, with only half the seasonal slowdown we typically see from October to November,” RE/MAX President Nick Bailey said in the report. “The small drop in prices is great news for buyers, and it could be an early sign of some balance coming back into the market.”
Using a five-year average from 2015-2019 (2020 is excluded because of pandemic distortions on data), home sales typically decline 12.0% from October to November. This year, sales declined only 4.9%.
Inventory typically declines by 8.9% from October to November. This year it fell 17.7%, leaving the market with a 1.2 months supply – just shy of the record-low 1.1 months supply in March, April, May, and June. A six months supply is considered balanced.
Market Indicator Five-year average (2015-2019) November 2021 Home sales-12%-4.9%Inventory-8.9%-17.7%Median sales priceRebound slightlyFell 2.9%Data from RE/MAX.
While November homebuyers faced more competition for less inventory than typical years, they also were also greeted with an unusual dip in home prices. Using the 2015-2019 five-year average, home prices typically decline from July through October before rebounding slightly in November and December.
But the fall housing market didn’t get the memo. Prices increased by 0.8% in October before decreasing nearly 3% in November.
The median sales price was up 11.9% year-over-year in November, down significantly from the June peak of 21.9%.
After a year of double-digit price growth, homebuyers may be in for much-needed price relief in 2022. Industry price growth forecasts range from 16% to -2.8%, with an average around 6.1%, which would be substantially lower than the average 18% growth in 2021.