Existing-home sales slumped for the second consecutive month in January and experienced their largest decline on an annual basis in more than three years, according to the National Association of Realtors. NAR’s chief economist said the numbers highlight the housing market’s glaring inventory shortage.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, sank 3.2% in January to a seasonally adjusted annual rate of 5.38 million from a downwardly revised 5.56 million in December 2017. After last month’s decline, sales are 4.8% below a year ago, the largest annual decline since August 2014, and at their slowest pace since last September, 5.37 million.
All major regions saw monthly and annual sales declines in January.
Lawrence Yun, NAR chief economist, says the retreat in closings highlights the housing market’s glaring inventory shortage to start 2018.
“The utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the U.S. last month,” he said. “While the good news is that realtors in most areas are saying buyer traffic is even stronger than the beginning of last year, sales failed to follow course and far lagged last January’s pace. It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth.”
The median existing-home price for all housing types in January was $240,500, up 5.8% from January 2017 to $227,300. January’s price increase marks the 71ststraight month of year-over-year gains. Total housing inventory at the end of January rose 4.1% to 1.52 million existing homes available for sale, but is still 9.5% lower than a year ago, and has fallen year-over-year for 32 consecutive months. Unsold inventory is at a 3.4-month supply at the current sales pace compared to 3.6 months a year ago.
“Another month of solid price gains underlines this ongoing trend of strong demand and weak supply. The underproduction of single-family homes over the last decade has played a predominant role in the current inventory crisis that is weighing on affordability,” said Yun. “However, there’s hope that the tide is finally turning. There was a nice jump in new home construction in January and homebuilder confidence is high. These two factors will hopefully lay the foundation for the building industry to meaningfully ramp up production as this year progresses.”
First-time buyers were 29% of sales in January, which is down from 32% in December 2017 and 33% a year ago. NAR’s 2017 Profile of Home Buyers and Sellers – released in late 2017 – revealed that the annual share of first-time buyers was 34 percent.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage moved higher for the fourth straight month to 4.03% in January from 3.95% in December. The average commitment rate for all of 2017 was 3.99%.
“The gradual uptick in wages over the last few months is a promising development for the housing market, but there’s risk these income gains could be offset by the recent jump in mortgage rates,” said Yun. “That is why the pace of added new and existing supply in the months ahead is worth monitoring. If inventory conditions can improve enough to cool the swift price growth in several markets, most prospective buyers should be able to absorb the higher borrowing costs.”
Properties typically stayed on the market for 42 days in January, which is up from 40 days in December 2017 but down from a year ago when it was 50 days. Forty-three percent of homes sold in January were on the market for less than a month.
Realtor.com’s Market Hotness Index, measuring time-on-the-market data and listings views per property, revealed that the hottest metro areas in January were San Francisco-Oakland-Hayward, Calif.; San Jose-Sunnyvale-Santa Clara, Calif.; Vallejo-Fairfield, Calif.; Midland, Texas; and Colorado Springs, Colo.
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