If you heard an unexplained dull thud this December, it might have been the housing market hitting rock bottom.

High mortgage rates dragged sales of previously existing homes down 1% in December from November to a seasonally-adjusted annual rate of 3.78 million, a new low since 2010, the National Association of Realtors said Friday. Forecasters had expected a slight uptick, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal. All in all, home sales in 2023 were the slowest since 1995 when there were fewer houses and a lower population, according to data from the NAR.

Because contracts to buy houses are usually signed a month or two ahead of when the deal closes, the December sales figures were for houses sold when mortgage rates were at or near their highest in over 20 years, putting borrowing costs out of reach for many buyers. The average rate for a 30-year mortgage hit 7.79% at the end of October and has since fallen to 6.60% according to Freddie Mac, stoking hopes that the outlook for homebuyers will improve from here on out.

“The latest month’s sales look to be the bottom before inevitably turning higher in the new year,”  Lawrence Yun, chief economist at the association, said in a statement. “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”

Inflation has cooled off since last year, and many expect that the Federal Reserve will soon begin to reverse its campaign of anti-inflation interest rate hikes. Those events have pushed mortgage rates lower in recent months.

Lower mortgage rates could alleviate one of the major factors that have put the housing market into a state of gridlock: Many sellers don’t want to move because doing so would mean giving up a cheap mortgage secured when rates were ultra-low during the pandemic. That’s kept inventory low, and competition for those few homes on the market has kept prices high. 

"First-time buyers were really struggling to get into the market, or at least that was the case through last year," Yun said in a conference call with reporters.

Indeed, the typical home sold for $382,600 in December, the highest ever for that month in NAR’s price records, which are not seasonally adjusted. (Home prices typically peak in the summer and fall in the winter.)

Forecasters expect affordability to improve in 2024 as mortgage rates fall and more homes come on the market.