Existing-Home Sales Dipped in January, Despite Lower Mortgage Rates

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Despite falling mortgage rates, existing-home sales dipped 1.2% in January relative to December to a seasonally adjusted annual rate of 4.94 million, according to the National Association of Realtors (NAR).

Regionally, existing-home sales fell 2.9% in the West, 2.5% in the Midwest, and 1.0% in the South, however, they increased 2.9% in the Northeast.

It was the third consecutive month that existing-home sales fell on a month-over-month basis.

Sales were down 8.5% compared with January 2018.

However, existing-home sales are expected to pick up as we move into the spring home buying season.

Lawrence Yun, chief economist for NAR, says although existing-home sales in January were “weak compared to historical norms,” they “are likely to have reached a cyclical low.”

“Moderating home prices combined with gains in household income will boost housing affordability, bringing more buyers to the market in the coming months,” Yun says in a statement.

The median existing-home price for all housing types (NAR includes sales of condominiums, townhouses and co-ops with its results) in January was $247,500, an increase of 2.8% compared with $240,800 in January 2018.

January marked the 83rd straight month of year-over-year price gains.

Yun says although falling mortgage rates failed to boost home sales in December and January, that is not likely to be the case moving forward.

“Lower rates will inevitably lead to more home sales,” he says.

As of the end of January there were about 1.59 million existing homes available for sale, up from 1.53 million in December and up from 1.52 million in January 2018.

That’s about a 3.9-month supply at the current sales pace.

Properties remained on the market for an average of 49 days in January, up from 46 days in December and 42 days a year ago.

Thirty-eight percent of homes sold in January were on the market for less than a month.

While total inventory grew on a year-over-year basis for the sixth straight month, Yun says the market is still suffering from an inventory shortage.

“In particular, the lower end of the market is experiencing a greater shortage, and more home construction is needed,” he says. “Taking steps to lower construction costs would be a tremendous help. Local zoning ordinances should also be reformed, while the housing permitting process must be expedited; these simple acts would immediately increase homeownership opportunities and boost local economies.”

January brought a bump in distressed sales, which increased to 4% of all sales, up from 2% in December but down from 5% in January 2018.

First-time buyers accounted for 29% of sales in January, down from 32% in December, while all-cash sales accounted for 23% of transactions in January, up from 22% in December.

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