According to the National Association of Manufacturers’ (NAM) Monday Economic Report for this week, existing home sales fell 1.0% to 3.78 million units at the annual rate in December, the slowest rate since August 2010. Homeowners who locked in historically low mortgage rates have been less willing to sell their existing homes, which limits inventories for sale.

There were 3.2 months of unsold inventory of existing homes for sale on the market in December, down from 3.5 months in November. The median sales price was $382,600, up 4.4% from one year ago.

After jumping 10.8% in the prior release, new housing starts pulled back by 4.3%, dropping from 1,525,000 units at the annual rate in November to 1,460,000 units in December. Single-family housing starts decreased from 1,124,000 units to 1,027,000 units but ended the year +15.8% YoY. Reduced mortgage rates over the past few months have helped boost demand for new housing construction even as issues of affordability continue.

New housing permits—a proxy for future residential construction—increased 1.9% from an annualized 1,467,000 units in November to 1,495,000 units in December. In total, housing permits rose 6.1% YoY, with single-family permits soaring 32.9%; multifamily permits, however, dropped 24.2% over the past 12 months.

Homebuilder sentiment also improved significantly in January, lifted by reduced mortgage rates. The Housing Market Index rose from 37 in December to 44 in January. With rates lowering in the past two months, there is hope for stronger demand among potential homebuyers. Affordability continues to be the problem for would-be buyers over the past few years.