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

After a brief pullback in December, homebuyers returned to the market, although they were still hampered by a record supply.

Closed sales of existing homes in January were up 0.6% from December, according to the National Association of Realtors.

Sales ended the month at a seasonally adjusted annualized rate of 6.69 million units, up 23.7% from January 2020. This was the second highest sales pace since April 2006.

“Home sales continue to play a role in supporting the economy,” said Lawrence Yun, chief economist of NAR. “With additional stimulus likely to pass and several vaccines now available, the housing outlook looks strong this year.”

There were 1.04 million homes for sale at the end of January, a 26% decline from a year ago. At the current rate of sales, there is now a supply of 1.9 months, the lowest since realtors began tracking this measure in 1982. A year ago, there were more than 3 months of supply.

The lack of supply in the face of strong demand continues to push prices higher and higher. The median price of an existing home sold in January was $ 303,900, a 14.1% increase from January 2020. This is the highest January price on record by realtors.

“We need to build more houses,” Yun said. “Even though housing starts are on the decline, it is interesting to note that housing permits, the desire to build homes, remain at their highest for over a decade.

Activity was slowest in the very low end of the market, with sales of homes under $ 100,000 down 28% year over year and sales of homes at $ 1 million up 77%.

Days on the market continue to be very quick, with homes selling on average in 21 days. In January, homes sold on average in 43 days.

Mortgage rates approached record lows in December, when most of the contracts relating to these sales were reportedly signed. This has given buyers additional purchasing power, especially given the sky-high house prices. Over the past week, however, mortgage rates have risen sharply.

“Looking ahead, we expect demand to remain strong thanks to a large and ever-growing cohort of buyers reaching prime buying age, but the rise in mortgage prices and rates – which jumped this week – could dampen buyer enthusiasm as monthly costs increase. ” said Danielle Hale, chief economist at realtor.com.

Sales of newly built homes, measured by signed contracts and not closings, rose 15% year over year in November, which was the latest reading. New home builders are taking advantage of the severe shortage of existing homes for sale, but are struggling to meet demand due to a recent spike in lumber prices. They are also seeing shortages of finished lots and skilled labor.