January Existing Home Sales Down 1.3% But Longer-Term Outlook Promising
Existing home sales declined in January, continuing what the National Association of Realtors described as “a fluctuating pattern” of monthly increases and declines.”
NAR reported total existing home sales fell by1.3% from December to a seasonally adjusted annual rate of 5.46 million in January. However, for the second straight month, overall sales substantially increased year-over-year, up by 9.6% from a year ago (4.98 million).
The report said single-family home sales fell to a seasonally adjusted annual rate of 4.85 million in January, down from 4.91 million in December, but up 9.7% from a year ago. The median existing single-family home price rose to $268,600 in January, up by 6.9% from a year ago. Existing condominium and co-op sales fell to a seasonally adjusted annual rate of 610,000 units in January, down 1.6% from December but 8.9% higher than a year ago. The median existing condo price was $248,100 in January, an increase of 5.7% from a year ago.
Regionally, results were mixed, although all regions posted year-over-year improvements. Median home prices in all regions increased from one year ago, with the Northeast region showing the strongest price gain.
Sales in the South rose by 0.4% to an annual rate of 2.38 million in January and improved by 11.7% from a year ago. The median price in the South rose to $229,900, a 6.3% increase from a year ago. Sales in the West fell by 9.4% to an annual rate of 1.06 million in January, but improved by 8.2% from a year ago. The median price in the West rose by 5.2 percent to $393,800.
Sales in the Northeast saw no movement, at an annual rate of 730,000, but rose by 7.4% from a year ago. The median price in the Northeast jumped to $312,100, up 11.5% from January 2019. Sales in the Midwest increased by 2.4 percent to an annual rate of 1.29 million and improved by 8.4% from a year ago. The median price in the Midwest rose to $200,000, a 5.4% increase from a year ago.
Mark Vitner, Senior Economist with Wells Fargo Securities, Charlotte, N.C., said unseasonably mild weather in December and January, coinciding with a pullback in mortgage rates, could signal stronger sales in February and March.
“Realtors cannot sell homes that are not on the market, however, which would likely limit an upside breakout,” Vitner said. “Sales continue to be constrained by exceptionally lean inventories. Prices have firmed, raising affordability hurdles.”
Vitner noted the mismatch between rising sales and falling inventories means that homes are selling quickly and often above the asking price. “The competition for homes is pulling prices higher,” he said. “Competition for homes priced at or below the median has been particularly intense. Demand for higher priced homes in the Northeast is also reviving, following a period of slower sales and discounting related to tax reform, which limited deductions for mortgage interest and property taxes.”
NAR Chief Economist Lawrence Yun said the 2020 outlook remains promising, despite the January drop. “The trend line for housing starts is increasing and showing steady improvement, which should ultimately lead to more home sales,” he said.
NAR reported the median existing home price for all housing types in January rose to $266,300, up 6.8% from a year ago ($249,400), marking the 95th consecutive month of year-over-year gains as prices increased in every region. “Mortgage rates have helped with affordability, but it is supply conditions that are driving price growth,” Yun said.
Total housing inventory at the end of January rose to 1.42 million units, up 2.2% from December, but down by 10.7% from one year ago (1.59 million). The housing inventory level for January is the lowest level since 1999. Unsold inventory sits at a 3.1-month supply at the current sales pace, up from the 3.0-month figure recorded in December and down from the 3.8-month figure recorded in January 2019.
The report said properties typically stayed on the market for 43 days in January, seasonally up from 41 days in December, but down from 49 days in a year ago. Forty-two percent of homes sold in January were on the market for less than a month.
NAR said first-time buyers represented 32% of sales in January, up from 31% in December and up from 29% a year ago. The NAR 2019 Profile of Home Buyers and Sellers reported the annual share of first-time buyers rose to 33%.
“It is good to see first-time buyers slowly stepping into the market,” Yun said. “The rise in the homeownership rate among the younger adults, under 35 and minority households means an increasing number of Americans can build wealth by owning real estate. Still, in order to further expand opportunities, significantly more inventory and home construction are needed at the affordable price points.”
NAR said individual investors or second-home buyers purchased 17% of homes in January, equal to December and up slightly from 16% a year ago. All-cash sales represented 21% of transactions in January, up from 20% in December but down from 23% a year ago.
Distressed sales represented 2% of sales in January, unchanged from December and down from a year ago.