Closed sales of previously owned homes in December fell 4.6% to a seasonally adjusted, annualized rate of 6.18 million units, according to the National Association of Realtors. Sales were down 7.1% year-over-year.

Still, December rounded out a year of strong sales, much of that fueled by the pandemic and by the largest generation, millennials, aging into their homebuying years. Full-year 2021 sales came in at 6.12 million, an increase of 8.5% from 2020. It was the strongest sales year since 2006.

Sales could likely have been higher were it not for incredibly low supply. There were just 910,000 homes for sale at the end of December, a drop of 14.2% from December 2020. At the current sales pace, that represents a 1.8-month supply. A balanced market between buyers and sellers is usually a 4-6 month supply. Both the total supply and month’s supply are at all-time lows on the NAR’s inventory count, since it began tracking in1982.

“Home builders have already made strides in 2022 to increase supply, but reversing gaps like the ones we’ve seen recently will take years to correct,” said Lawrence Yun, chief economist for the Realtors.

Low supply continued to put pressure on prices. The median price of an existing home sold in December was $358,000, an increase of 15.8% compared with December 2020. This is a slight reacceleration of home price gains, implying that demand is still quite strong.

By price category, sales continue to be stronger on the high end of the market, simply because there is so much more supply there. Sales of homes priced between $100,000 and $250,000 dropped 23% in December from the previous December, while sales of homes priced between $750,000 and $1 million rose 32%. Sales of home priced above $1 million rose 38%.

For the full year, the median price came in at $346,900, a record high and the fastest price growth since 1999. With the price up 17% year-over-year, the average homeowner gained $50,200 in housing wealth just last year.

Strong demand was also clear in the average number of days it took to sell a home in December, just 19. That is considered quite quick. In December 2020, days-on-market was 21. All-cash purchases remained elevated at 23% of all sales. Investors also continue to be active, representing 17% of December sales, up from 14% the previous year.

Home prices have been soaring over the last two years, in part due to very low interest rates. That may be about to change. The average rate on the popular 30-year fixed mortgage in October and November, when most of December sales contracts were signed, was about 60 basis points lower than it is today. Mortgage rates have been rising quickly over the last month, and some expect that to take some of the heat out of home prices going forward.

First-time buyers appear to be coming back to the market, making up 30% of sales after a weaker showing of 24% in November. These buyers may be rushing in, concerned that mortgage rates will move even higher, and they could end up priced out.

“We do expect mortgage rates to continue to increase, some people may want to jump in as rates increase further, but others may be priced out,” said Yun. “But rising rates usually cut home sales.”