Jan. 9, 2023

About half as many homes sold in Sioux Falls in December compared with the same time last year.

Closed sales dropped 51 percent, reflecting 156 homes sold for the month, compared with 317 the same time a year ago.

The city ended December with a 2.1-month supply of homes on the market, up 15.2 percent from the end of 2021, according to the Realtor Association of the Sioux Empire Inc.

There are fewer actual homes available, though. The market had 549 homes for sale at the end of the month, down from 570 at the end of 2021.

New listings in December increased 3.8 percent year over year.

“2022 was a turbulent year for the U.S. housing market as inflation, soaring interest rates and elevated sales prices combined to cause a slowdown nationwide,” according to an analysis included in the report.

The average price of a home sold in Sioux Falls in December was $346,350, up 18.5 percent compared with a year ago. The median home price was up 13.2 percent at $294,100.

“Affordability challenges continue to limit market activity, with pending home sales and existing-home sales down month over month and falling 37.8 percent and 35.4 percent year over year, respectively, according to the National Association of Realtors,” it said. “Higher mortgage rates are also impacting prospective sellers, many of whom have locked in historically low rates and have chosen to wait until market conditions improve before selling their home.”

The average house spent 67 days on the market before selling, the same as a year ago.

Sellers received an average of 98.4 percent of their original list price, which is a drop of 2.2 percentage points and shows a less competitive buyer market than previous months.

“Economists predict sales will continue to slow and housing prices will soften in many markets over the next 12 months, with larger price declines projected in more expensive areas,” the report said. “However, national inventory shortages will likely keep prices from dropping too much as buyer demand continues to outpace supply, which remains limited at 3.3 months, according to NAR. Even if prices fall, many prospective buyers will find it difficult to afford a home in 2023 as higher rates have diminished purchasing power, adding hundreds of dollars to monthly mortgage payments.”

Homebuilders nationwide are finding themselves with excess supply and starting to reduce prices and offer sales incentives, the report found.

The most recent survey by the National Association of Home Builders found 36 percent of single-family homebuilders reported cutting prices, with an average price reduction of 6 percent. Nearly six in 10 builders reported offering sales incentives, including price discounts, paying closing costs or fees, and offering free upgrades or price discounts.