Existing home sales rise slightly in January, but record low supply weighs on market

After a brief setback in December, homebuyers returned to the market, although they are still hampered by a historic low supply.

Closed sales of existing homes in January rose 0.6% relative to December, according to the National Association of Realtors.

Sales ended the month at a seasonally adjusted annualized rate of 6.69 million units, 23.7% higher compared to January 2020. This is the second highest sales rate since April 2006. .

“Home sales continue to play a role in boosting the economy,” said Lawrence Yun, chief economist at the NAR. “With additional stimuli likely to pass and several vaccines available now, the housing outlook looks solid for this year.”

There were 1.04 million homes for sale at the end of January, a 26% drop from last year. At the current pace of sales, there is now a 1.9-month supply, the lowest since realtors began tracking this metric in 1982. A year ago there was more than one supply of three months.

The lack of supply in the face of strong demand continues to drive up prices more and more. The average price of an existing home sold in January was $ 303,900, up 14.1% from January 2020. This is the highest price real estate agents have ever recorded.

“We need to build more houses,” Yun said. “While housing is starting to show a decline, it’s interesting that housing permits, the desire to build housing, are kept at their peak in a decade.”

Activity was the slowest at the very low end of the market, with home sales at less than $ 100,000, up 28% year-on-year, and millionaire home sales rose 77 percent. %.

Days on the market are still very fast, and homes sell on average in 21 days. Last January, homes were sold on average in 43 days.

Mortgage rates were near record lows in December, when most contracts on these sales would have been signed. This gave buyers additional purchasing power, especially because of the high house prices. However, last week mortgage rates have risen sharply.

“Looking to the future, we expect demand to remain strong thanks to a large and still growing cohort of buyers reaching the first age of purchase, but rising prices and mortgage rates (which jumped this week) it could diminish buyers ’enthusiasm as monthly costs increase.” Said Danielle Hale, chief economist at realtor.com.

New home sales, measured by signed contracts and not foreclosures, rose 15% year-on-year in November, which was the last reading. New home builders benefit from the severe shortage of existing homes for sale, but have trouble keeping up with demand due to the recent rise in timber prices. They also see shortages of finished batches and skilled labor.