Existing-home sales picked up in January as buyers took advantage of the lowest mortgage rates seen in several months.
Existing-home sales rose 3.1% from December to a seasonally adjusted annual rate of 4 million in January, according to a report from the National Association of Realtors (NAR). Year over year, sales dipped 1.7%, down from 4.07 million in January 2023.
Regionally, sales accelerated on a monthly basis in the Midwest, South and West, while they held steady in the Northeast. Year over year, sales increased in the West and decreased everywhere else.
“While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand,” NAR chief economist Lawrence Yun said in a statement. “Listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year.”
In fact, by the end of January, for-sale housing inventory was at 1.01 million units, up 0.2% from December and up 3.1% from one year ago. While inventory is less depleted, it remains well below the pre-pandemic level of January 2019.
“The housing shortage is acute compared to before the pandemic,” Holden Lewis, home and mortgage expert at NerdWallet, said in a statement. “There were 1 million existing homes on the market at the end of January, compared to an inventory of 1.59 million in January 2019.”
This reading comes on the heels of the worst year for existing-home sales since 1995.
“It is widely expected that overall market activity will increase in 2024,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement.
The median sales price kept rising as shelter inflation remained the main driver of core inflation in January. The median existing-home sales price increased by 5.1% year over year to $379,100. It was the seventh consecutive month of annualized price gains.
All four U.S. regions posted price increases. But while sales prices rose, rent prices continued to soften in January. Despite the pullback, rents remain up 18.3% compared to the start of 2019, according to Realtor.com data.
“The median home price reached an all-time high for the month of January,” Yun said. “Multiple offers are common on mid-priced homes, and many homes were still sold within a month. The elevated share of cash deals, 32%, indicated a market full of multiple offers and propelled by record-high housing wealth.”
Unsold inventory sits at a 3-month supply at the current sales pace, down from 3.1 months in December and up from 2.9 months in January 2023.
A significant amount of multifamily supply is set to be completed this year, which should help to balance supply and demand while driving rent gains. But this influx of apartment supply won’t be equally distributed across markets.
According to a report from John Burns Research & Consulting, the biggest multifamily unit pipelines will be found in cities like Dallas, New York, Phoenix, Austin, Atlanta, Charlotte, Houston, Washington, D.C., and Denver.
What to expect for the spring buying season?
On the heels of a hotter-than-expected jobs report and inflation readings, mortgage rates have moved upward again recently. This could lead to slower seasonally adjusted sales as the heart of homebuying season approaches, Realtor.com chief economist Danielle Hale said in a statement.
But not all consumers are put off by higher mortgage rates. According to a recent Realtor.com survey, 47% of millennial home shoppers reported they would still buy a home even with an 8% mortgage rate. On the other hand, older generations were less likely to buy with a rate above 8%, possibly reflecting their attachment to an existing lower-rate mortgage.
“Existing home sales will continue to be constrained in the foreseeable future as the supply of homes remains tight and sellers continue to wait for lower mortgage rates,” CoreLogic chief economist Selma Hepp said in a statement.
“All eyes are on the Fed now to cut rates this summer in order to provide relief to the buyers as well as stubborn sellers. Should they do so, existing home sales should expect a better outlook for the remainder of the year.”
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