Closed sales of previously owned homes dropped 4.6% in December, according to the National Association of Realtors (NAR). Overall home sales slipped 7.1% on a year-over-year basis.

Lawrence Yun, NAR's chief economist, called the results for December a "retreat" from previous months and he laid the blame on supply chain issues.

"December saw sales retreat, but the pullback was more a sign of supply constraints than an indication of a weakened demand for housing," said Yun. "We saw inventory numbers hit an all-time low in December. Homebuilders have already made strides in 2022 to increase supply, but reversing gaps like the ones we've seen recently will take years to correct."

Underscoring this is the deterioration of homebuilders’ sentiments in recent weeks.

According to the latest results of the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), homebuilders expressed their concerns about the lack of inventory in the face of strong demand for homes. This has added to the problems encountered in the complicated two years of the COVID-19 pandemic, owing to an inadequate supply of labor and mounting costs for building materials.

Housing demand was strong in 2021, something partially attributed to growing interest in homeownership from millennials. As they come of home-buying age, millennials have accounted for a wider share of demand than other groups, but they remain one of the least likely to own a home. A lack of savings, large amounts of student debt and high housing prices are the main deterrents to increased homeownership by this generation as they consider settling into new homes.

NAR said 2021 was a strong year for home sales. Existing home sales hit 6.12 million, an increase of 8.5% from 2020, and it hit its highest annual level since 2006, according to Yun.

First-time homebuyers made up 30% of this total, down from the 31% seen the year before, but above the 26% seen in November 2021. Owners of second homes and individual investors made up the next-largest group with 17% of sales made to these groups.