Existing Home Sales Start Year on Strong Note
Existing home sales got off to a fast start in 2017, surpassing a recent cyclical high and increasing in January to the fastest pace in nearly a decade, the National Association of Realtors reported yesterday.
NAR said total existing home sales rose by 3.3 percent to a seasonally adjusted annual rate of 5.69 million in January from an upwardly revised 5.51 million in December. January’s sales pace is 3.8 percent higher than a year ago (5.48 million) and surpasses November (5.60 million) as the strongest since February 2007 (5.79 million).
Single-family home sales rose by 2.6 percent to 5.04 million units in January from 4.91 million in December and improved by 3.7 percent from a year ago (4.86 million). The median existing single-family home price rose to $230,400 in January, up 7.3 percent from a year ago. Existing condominium and co-op sales rose by 8.3 percent to 650,000 units and improved by 4.8 percent from a year ago. The median existing condo price rose to $217,400 in January, 6.2 percent above a year ago.
Three of the four regions saw increases. Sales in the South rose by 3.6 percent in January to 2.31 million and by 3.1 percent from a year ago. The median price in the South rose to $201,400, up 9.2 percent from a year ago. Sales in the West grew by 6.6 percent to 1.29 million in January and by 8.4 percent from a year ago. The median price in the West rose to $332,300, up 6.8 percent from a year ago.
Sales in the Northeast rose by 5.3 percent to 800,000 in January and by 6.7 percent from a year ago. The median price in the Northeast rose to $253,800, 2.5 percent higher than a year ago. In the Midwest, sales decreased by 1.5 percent to 1.29 million in January and fell by 0.8 percent from a year ago. The median price in the Midwest rose to $174,900, up 6.5 percent from a year ago.
Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said sales and prices rose slightly faster than expected. “Home sales are now running at their strongest pace since the recession,” he said. “Median home prices also rose faster than expected. The strong start to the year suggests that realtors’ commissions should make a larger contribution to first quarter growth.”
Vitner added that low inventories and mild weather “might get the spring selling season off to an early start. Sales in the Sunbelt appear to have strong momentum.”
NAR Chief Economist Lawrence Yun said January’s sales gain signals resilience among consumers even in a rising interest rate environment. “Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home,” he said. “Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions.”
NAR reported the median existing-home price in January was $228,900, up 7.1 percent from a year ago ($213,700) but down slightly from December. January’s price increase marked the fastest since last January (8.1 percent) and the 59th consecutive month of year-over-year gains.
Total housing inventory at the end of January rose by 2.4 percent to 1.69 million existing homes available for sale, but was 7.1 percent lower than a year ago (1.82 million) and has fallen year-over-year for 20 straight months. Unsold inventory is at a 3.6-month supply at the current sales pace (unchanged from December).
The report said properties typically stayed on the market for 50 days in January, down from 52 days in December and considerably more a year ago (64 days). Short sales were on the market the longest at a median of 108 days in January, while foreclosures sold in 51 days and non-distressed homes took 49 days. Thirty-eight percent of homes sold in January were on the market for less than a month.
First-time buyers represented 33 percent of sales in January, up from 32 percent both in December and a year ago. All-cash sales represented 23 percent of transactions in January, up from 21 percent in December but down from 26 percent a year ago. Individual investors purchased 15 percent of homes in January, unchanged from December and down from 17 percent a year ago. Fifty-nine percent of investors paid in cash in January.
Distressed sales represented 7 percent of sales in January, unchanged from December and down from 9 percent a year ago. Five percent of January sales were foreclosures; 2 percent were short sales. Foreclosures sold for an average discount of 14 percent below market value in January (20 percent in December), while short sales were discounted 10 percent (unchanged from December).
“Persistently tight inventory and expected increases in mortgage rates will likely temper existing home sales and continue to squeeze first-time homebuyers as we enter spring home-buying season,” said Ralph McLaughlin, chief economist with Trulia, San Francisco. “Low inventory remains the cautionary counterpoint to otherwise positive existing home sales numbers…should mortgage rates creep up as anticipated, stronger headwinds are in store for homebuyers already facing thin existing supply.”
