Existing Home Sales Hit Decade High As Prices Jump More Than 7%
So much for concerns that rising rates would slam the US real estate market.
According to the NAR, in January, Existing home sales jumped by 3.3%, well above the 1.1% consensus estimate, and more than reversing last month’s revised -1.6% drop. The annuallized pace of sales rose to 5.69 million, above the 5.54 million estimate, and the biggest monthly jump since March 2016. January’s sales pace was 3.8% higher than a year ago (5.48 million) and surpasses November 2016 (5.60 million) as the strongest since February 2007 (5.79 million).
Praising the rebound in housing transactions, NAR’s chief economist Larry 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.”
And yet, there remains a glaring disconnect between the housing transactions, and mortgage applications, which as shown in the chart below, have tumbled in recent weeks far below prior years, as a result of rising rates.
The west led housing transaction, with only the midwest posting a 1.5% decline:
- January existing-home sales in the Northeast jumped 5.3 percent to an annual rate of 800,000, and are now 6.7 percent above a year ago. The median price in the Northeast was $253,800, which is 2.5 percent above January 2016.
- In the Midwest, existing-home sales decreased 1.5 percent to an annual rate of 1.29 million in January, and are 0.8 percent below a year ago. The median price in the Midwest was $174,900, up 6.5 percent from a year ago.
- Existing-home sales in the South in January rose 3.6 percent to an annual rate of 2.31 million, and are now 3.1 percent above January 2016. The median price in the South was $201,400, up 9.2 percent from a year ago.
- Existing-home sales in the West ascended 6.6 percent to an annual rate of 1.29 million in January, and are now 8.4 percent above a year ago. The median price in the West was $332,300, up 6.8 percent from January 2016.
The median existing-home price was $228,900, up 7.1% from January 2016 ($213,700). January’s price increase was the fastest since last January (8.1%) and marks the 59th consecutive month of year-over-year gains.
Total housing inventory at the end of January rose 2.4 percent to 1.69 million existing homes available for sale, but was still 7.1% 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 2016). 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.
Metro areas where listings stayed on the market the shortest amount of time in January were San Jose-Sunnyvale-Santa Clara, Calif., 43 days; San Francisco-Oakland-Hayward, Calif., 47 days; San Diego-Carlsbad, Calif., 55 days; Seattle-Tacoma-Bellevue, Wash., 57 days; and Nashville-Davidson-Murfreesboro-Franklin, Tenn., Vallejo-Fairfield, Calif., and Greeley, Colo., all at 58 days.
Looking at the composition of buyers, first-time buyers were 33% of sales in January, which is up from 32% both in December and a year ago. NAR’s 2016 Profile of Home Buyers and Sellers revealed that the annual share of first-time buyers was 35% . According to Freddie Mac, the average commitment rate (link is external) for a 30-year, conventional, fixed-rate mortgage decreased slightly in January to 4.15 percent from 4.20 percent in December. The average commitment rate for all of 2016 was 3.65 percent.
Meanwhile, all cash sales continued to rise, and represented 23% of transactions in January, up from 21% in December but down from 26% a year ago. Individual investors, who account for many cash sales, 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.
For now it remains unclear whether the recent spike in transactions will persist once consumer confidence fades away even as higher mortgage rates remain. A further challenge to existing homes: the gradual disappearance of Chinese and other foreign buyers, which as discussed before, has had a substantial impact on ultra high end housing.