Existing Home Sales Decline, Inventory Still a Big Issue

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Sales
of existing homes fell again in January, the second consecutive
month-over-month decline.  Sales of pre-owned
single-family homes, townhomes, condos, and cooperative apartments were down
3.2 percent compared to December, and the seasonally adjusted annual sales in
December, already estimated at a 3.6 percent decline, were revised down even
further. 
The
National Association of Realtors® (NAR) said existing homes sold during the
month at a seasonally adjusted rate of 5.38 million, representing a
year-over-year decline of 4.8 percent. 
It was the slowest sales pace since last September and the largest annual
loss since a 5.5 percent decline in August 2014. December sales were revised
down from 5.570 million to 5.56 million. The
months sales results were broad-based. All four U.S. regions saw both monthly
and annual declines.

The negative report was also unexpected. Analysts
polled by Econoday forecast a slight improvement over December with a consensus
of 5.640 million units. Estimates ranged from 5.480 million to 5.700 million. Econoday
however also remarked that the number of homes for sale, a 19-year low, could
limit January’s results. Single-family
home sales slipped 3.8 percent to a seasonally adjusted annual rate of 4.76
million in January from 4.95 million in December. Those sales were 4.8 percent
below the 5.00 million pace a year earlier.  Existing condominium and co-op sales improved
by 1.6 percent for the month, but the rate of sales, 620,000 units, was behind
that of a year earlier by 4.6 percent.

Lawrence Yun,
NAR chief economist, says January’s retreat in closings highlights the housing
market’s glaring inventory shortage at the start of 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 percent
from the January 2017 median of $227,300.  It was the 71st consecutive annual
gain.  The median existing single-family
home price rose 5.7 percent to $241,700 and condo prices were up 7.1 percent to
a median of $231,600.  

Total
inventories did grow
during the month, increasing by 4.1 percent to 1.52 million existing homes available for sale.
That number is still 9.5 percent lower than a year ago, marking the 32nd
straight month the inventory has shrunk on an annual basis.  Unsold inventory is estimated at a 3.4-month
supply at the current rate of sales. “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.”

The participation of first-time
buyers continues to lag.
Twenty-nine percent of sales in January were to that
cohort, down from 32 percent in December 2017 and 33 percent a year ago.  Investors purchased 17 percent of the homes
sold, up from 16 percent in both December and January 2017.  Twenty-two percent of sales were for all cash. “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, compared to 40 days in December
2017 and 50 days in January 2017.  Forty-three percent of homes sold in January
were on the market for less than a month.

NAR President Elizabeth
Mendenhall, says Realtors® in several markets are reporting that the
spring buying season appears to be starting early this year. “Those planning to
buy a home this spring should look into getting pre-approved for a mortgage now
and start having those serious conversations with their real estate agent on what
they’re looking for in a home and where they want to buy,” she said. “With
demand exceeding supply in most areas, competition will only heat up in the
months ahead. Beginning the home search now could lead to a successful and less
stressful buying experience.”

Distressed sales –
foreclosures and short sales
– were 5 percent of sales in January, unchanged
from December 2017 and down from 7 percent a year ago. Four percent of January
sales were foreclosures and 1 percent were short sales.

January existing-home
sales in the Northeast declined 1.4 percent to an annual rate of 730,000 units
and are now 7.6 percent below a year ago. The median home price in the region
increased 6.8 percent on an annual basis to $269,100.  

Existing home
sales slipped 6.0 percent month-over-month and by 3.8 percent on an annual
basis in the Midwest, finishing January at an annual rate of 1.25 million
units. The median price in the Midwest rose 8.7 percent to $188,000.           

In the South sales were
down 1.3 percent in January to a rate of 2.26 million. This is 1.7 percent
lower than sales the prior January. 
Prices increased 4.3 percent to a median of $208,200.            

There was a
5.0 percent month-over-month increase in sales in the West and the annual rate
of 1.14 million units is 9.5 percent below sales a year earlier. Prices rose
8.8 percent to a median of $362,600.



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