Last year was exceptional for the real estate market, which grew in the second half. Existing home sales data in January from the National Association of Realtors show the continuation of some of the same trends this year, as well as some key changes and growing challenges.
Existing home sales in January reached a seasonally adjusted annual rate of 6.69 million, faster than the expected 6.61 million FactSet consensus, and a 0.6% increase over the revised December rate. Sales were up 23.7% from last January, according to the statement.
This high rate shows that the resale market is still hot after home sales soared in the second half of the year. The seasonally adjusted January rate is one of the highest since April 2006, just second to the rate reported in October 2020, said Lawrence Yun, chief economist at the National Association of Agents of Real Estate, in a conference call with journalists.
While single-family sales remained strong at a rate of 5.93 million, sales of flats and co-ops made a bigger leap. Sales of flats and cooperatives increased by 4.1% month-on-month and 28.8% year-on-year, compared with an increase in single-family sales of 0.2% month-on-month and 23% year-on-year.
“Last year the single-family family was preferred over the condominium,” Yun said, “but now the property market is coming back.” Single-family homes still accounted for a much larger share of transactions in January, with 89% of unadjusted sales.
Luxury guides the way
Sales of single-family homes increased by 23% compared to last January, but the situation varies by price.
Homes priced between $ 250,000 and $ 500,000 accounted for the majority of homes sold at 40.1%. Sales in this category grew 27% year-on-year.
More affordable home transactions were reduced. Home sales with prices between $ 100,000 and $ 250,000 were 2% lower than the same month last year, while home sales under $ 100,000 fell 28% compared to January past.
The highest growth was in homes priced at more than $ 1 million, whose sales grew 77% compared to last January. “Growth in high-end sales is very strong, while in the lower price category, it is low or the increases are much smaller,” Yun said.
Buyers ’enthusiasm for higher prices could explain the average selling price of existing homes at $ 303,900, a slight decrease from previous months, but 14.1% higher than the previous year’s average price.
Inventory remains tight
A historically reduced supply of existing homes for sale could have been reduced to transactions in 2020, a trend that shows few signs of slowing in 2021. The housing inventory set another record low in the first month of the new year, said Yun in the call, which fell to 1.04 million units. The supply of months, or how long it would take at the current rate of sales to sell all the homes shown on the list, remained at 1.9 months, non-stop with the month of December, but dropped from 3 , 1 month last year. “Sales could be even higher, but there is simply no inventory,” Yun said.
Strong housing demand and scarce supply gave a boost to builders in 2020, but as of 2021, the industry is struggling with rising costs. January new home generation data released earlier this week showed a seasonally adjusted housing start-up rate, which the National Association of Home Builders partially attributed to the high price of materials. “We need to get more inventory,” Yun said in the call. “I know [builders] we face these prices of wood and other material costs, but we have to build more houses to get more supply ”.
Mortgage rates are rising
Low inventory is not the only concern of the residential real estate market as the spring sales season approaches. Rate hikes could also affect sales, Yun said, citing upward pressure on the 10-year Treasury yield, “a forerunner of mortgage rates.”
It is not the first time during the Covid-19 crisis that fears of higher mortgage rates have arisen. Builders ’shares fell in October as ten-year yields rose to a four-month high. At the time, the ten-year rise in yields did not affect mortgage rates much due to the unusually wide difference between the two. But the spread would continue to decline.
Mortgage rates began to rise from their all-time lows in early January. The 30-year average fixed-rate mortgage rate was 2.81% last week, the highest point since mid-November, according to Freddie Mac. And buyers shouldn’t expect rates to go down, Yun said.
“It is inevitable that mortgage rates will rise in the coming months,” he said, citing factors such as further stimulus or improved economic outlook as potential contributors to an increase in 10-year Treasury yields.
While rates will increase, they will remain low by historical standards, Yun says. He predicts that mortgage rates could reach an average of 3% by mid-2021.
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