Existing U.S. Home Sales Turned Frosty in January

John Jordan | March 3, 2015

WASHINGTON—Existing-home sales declined in January to their lowest rate in nine months, but the pace was higher than a year ago for the fourth straight month, according to the National Association of Realtors. All major regions experienced declines in January, with the Northeast and West seeing the largest sales decreases.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 4.9% to a seasonally adjusted annual rate of 4.82 million in January (lowest since last April at 4.75 million) from an upwardly-revised 5.07 million in December. Despite January’s decline, sales were higher by 3.2% than a year ago.

Lawrence Yun, NAR chief economist, said the housing market got off to a somewhat disappointing start to begin the year with January closings down throughout the country. “January housing data can be volatile because of seasonal influences, but low housing supply and the ongoing rise in home prices above the pace of inflation appeared to slow sales despite interest rates remaining near historic lows,” he said. “Realtors are reporting that low rates are attracting potential buyers, but the lack of new and affordable listings is leading some to delay decisions.”

Total housing inventory at the end of January increased 0.5% to 1.87 million existing homes available for sale, but was 0.5% lower than a year ago (1.88 million). Unsold inventory was at a 4.7-month supply at the current sales pace—up from 4.4 months in December.

The median existing-home price for all housing types in January was $199,600, which was 6.2% above January 2014. This marked the 35th consecutive month of year-over-year price gains.

“Although sales cooled in January, home prices continued solid year-over-year growth,” adds Yun. “The labor market and economy are markedly improved compared to a year ago, which supports stronger buyer demand. The big test for housing will be the impact on affordability once rates rise.”

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage in January fell to 3.67%, its lowest level since May 2013 (3.54%), and down from 3.86% in December. The average annual rate was 4.17% in 2014.  The percentage share of first-time buyers declined to 28% in January, the lowest since June 2014 (also 28%) and down from 29% in December. First-time buyers represented 26% of sales last January.

NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, AK, said that the Federal Housing Administration’s overly restrictive approval process limits buyers’ access to condos even though these properties are among the strongest in the agency’s portfolio. “Condominiums offer an affordable option and are the first step to homeownership for many homebuyers,” said Polychron. “NAR has urged the FHA to develop policies that will give buyers access to more flexible and affordable financing opportunities and a wider choice of approved condo developments.”

All-cash sales were 27% of transactions in January, up from 26% in December but down from 33% in January of last year. Individual investors, who account for many cash sales, purchased 17% of homes in January, unchanged from last month and below January 2014 (20%). Sixty-seven percent of investors paid cash in January.

Distressed sales—foreclosures and short sales—were 11% of sales in January, unchanged from last month but down from 15% a year ago. Eight percent of January sales were foreclosures and 3% were short sales. Foreclosures sold for an average discount of 15% below market value in January (unchanged from December), while short sales were discounted 12% (also unchanged from last month).

Properties typically stayed on the market slightly longer in January (69 days) than December (66 days) and a year ago (67 days). Short sales were on the market the longest at a median of 128 days in January, while foreclosures sold in 63 days and non-distressed homes took 68 days. Thirty percent of homes sold in January were on the market for less than a month.

Single-Family and Condo/Co-Op Sales

Single-family home sales dropped 5.1% to a seasonally adjusted annual rate of 4.27 million in January from 4.50 million in December, but were 3.9% above the 4.11 million pace a year ago. The median existing single-family home price was $199,800 in January, up 6.3% from January 2014.

Existing condominium and co-op sales declined 3.5% to a seasonally adjusted annual rate of 550,000 units in January from 570,000 in December, and were 1.8% below a year earlier. The median existing condo price was $198,300 in January, which was 5.3% higher than a year ago.

Regional Breakdown

January existing-home sales in the Northeast fell 6.0% to an annual rate of 630,000, but were 3.3% above a year ago. The median price in the Northeast was $247,800, which was 2.7% above a year ago.

In the Midwest, existing-home sales declined 2.7% to an annual level of 1.08 million in January, but were still 0.9% above January 2014. The median price in the Midwest was $151,300, up 8.2% from a year ago.

Existing-home sales in the South decreased 4.6% to an annual rate of 2.07 million in January, but were still 5.6% above January 2014. The median price in the South was $171,900, up 7.4% from a year ago.

Existing-home sales in the West dropped 7.1% to an annual rate of 1.04 million in January, but were still 1.0% above a year ago. The median price in the West was $291,800, which was 7.2% above January 2014.

John Jordan
Editor, Real Estate In-Depth