Existing-Home Sales Inch Forward, Price Growth Accelerates in January

Real Estate In-Depth | March 2016

WASHINGTON— Existing-home sales crept forward in January to the highest annual rate in six months, and subpar supply levels propelled price growth to the fastest increase since last April, according to the National Association of Realtors. The West was the only region to see a decline in sales in January. The Northeast enjoyed nearly a 3% hike in home sales in January.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, inched 0.4% to a seasonally adjusted annual rate of 5.47 million in January from a downwardly revised 5.45 million in December. Sales are now 11.0% higher than a year ago—the largest year-over-year gain since July 2013 (16.3%).

Lawrence Yun, NAR, Chief Economist
Lawrence Yun, NAR, Chief Economist

Lawrence Yun, NAR chief economist, said existing sales kicked off 2016 on solid footing, rising slightly to the strongest pace since July 2015 (5.48 million). “The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints,” he said. “Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession.”

The median existing-home price for all housing types in January was $213,800, up 8.2% from January 2015 ($197,600). Last month’s price increase was the largest since April 2015 (8.5%) and marked the 47th consecutive month of year-over-year gains.

Total housing inventory at the end of January increased 3.4% to 1.82 million existing homes available for sale, but was still 2.2% lower than a year ago (1.86 million). Unsold inventory is at a 4.0-month supply at the current sales pace, up slightly from 3.9 months in December 2015.

“The spring buying season is right around the corner and current supply levels aren’t even close to what’s needed to accommodate the subsequent growth in housing demand,” says Yun. “Home prices ascending near or above double-digit appreciation aren’t healthy—especially considering the fact that household income and wages are barely rising.”

The share of first-time buyers remained at 32% in January for the second consecutive month and was up from 28% a year ago. First-time buyers in all of 2015 represented an average of 30%, up from 29% in both 2014 and 2013.

All-cash sales were 26% of transactions in January (24% in December 2015) and were down from 27% a year ago. Individual investors, who account for many cash sales, purchased 17% of homes in January (15% in December 2015), matching the highest share since last January. Sixty-seven percent of investors paid cash in January.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage stayed below 4% for the sixth consecutive month and declined in January to 3.87% (lowest since October 2015 at 3.80%) from 3.96% in December. The average commitment rate for all of 2015 was 3.85%.

Properties typically stayed on the market for 64 days in January, an increase from 58 days in December, but below the 69 days in January 2015. Short sales were on the market the longest at a median of 77 days in January, while foreclosures sold in 57 days and non-distressed homes took 61 days. Thirty-two percent of homes sold in January were on the market for less than a month.

With homebuyers facing a tough market this spring, NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, FL, said Realtors overwhelmingly applauded the recent U.S. House of Representatives passage of H.R. 3700, the “Housing Opportunity Through Modernization Act.”

“This legislation contains a number of initiatives that put homeownership in reach for more families, including several reforms to current Federal Housing Administration restrictions on condominium financing. Now that the House has overwhelmingly voted in support of the bill, we look forward to working with our industry partners to advance it through the Senate.”

Distressed sales—foreclosures and short sales—rose slightly to 9% in January, up from 8% in December, but down from 11% a year ago. Seven percent of January sales were foreclosures and 2% were short sales. Foreclosures sold for an average discount of 13% below market value in January (16% in December), while short sales were discounted 12% (15% in December).

Single-family and Condo/Co-op Sales

Single-family home sales increased 1.0% to a seasonally adjusted annual rate of 4.86 million in January from 4.81 million in December, and were 11.2% higher than the 4.37 million pace a year ago. The median existing single-family home price was $215,000 in January, up 8.3% from January 2015.

Existing condominium and co-op sales fell 4.7% to a seasonally adjusted annual rate of 610,000 units in January from 640,000 in December, but were still 8.9% above January 2015 (560,000 units). The median existing condo price was $203,900 in January, which was 7.4% above a year ago.

Regional Breakdown

January existing-home sales in the Northeast increased 2.7% to an annual rate of 760,000, and were 20.6% above a year ago. The median price in the Northeast was $247,500, which was 0.9% above January 2015.

In the Midwest, existing-home sales rose 4.0% to an annual rate of 1.30 million in January, and were 18.2% above January 2015. The median price in the Midwest was $164,300, up 8.7% from a year ago.

Existing-home sales in the South were at an annual rate of 2.24 million in January (unchanged from December) and were 5.7% above January 2015. The median price in the South was $184,800, up 8.5% from a year ago.

Existing-home sales in the West decreased 4.1% to an annual rate of 1.17 million in January, but were still 8.3% higher than a year ago. The median price in the West was $309,400, which was 7.4% above January 2015.