The pace of existing-home sales slowed to nearly a crawl in January but still reached their highest level in six months, according to the National Association of Realtors (NAR) January 2016 Existing-Home Sales report released Tuesday. The combination of persistent tight inventory and rapid price appreciation in the housing market may mean a tough homebuying season in the spring, however.
Existing-home sales climbed at a rate of just 0.4 percent over-the-month in January up to a seasonally-adjusted rate of 5.47 million, the highest pace since July 2015 (5.48 million). Year-over-year in January, existing-home sales are 11 percent higher, the largest over-the-year gain since July 2013 (16.3 percent), according to NAR.
Short supply remained an issue, however; even with an over-the-month increase of 3.4 percent up to 1.82 million existing homes for sale as of the end of January 2016, housing inventory was 2.2 percent lower than January 2015’s total of 1.86 million. While inventory remains tight, prices are appreciating. The median existing-home sales price was $213,800 in January 2016 for all housing types (single-family homes, town homes, condominiums and co-ops) and is up 8.2 percent from the previous January’s median price of $197,600. January 2016 marked the largest price gain in nine months (8.5 percent in April 2015) and the 47th straight month of year-over-year home price appreciation.
“The spring buying season is right around the corner and current supply levels aren't even close to what's needed to accommodate the subsequent growth in housing demand,” NAR Chief Economist Lawrence Yun said. “Home prices ascending near or above double-digit appreciation aren't healthy—especially considering the fact that household income and wages are barely rising.”
“The spring buying season is right around the corner and current supply levels aren't even close to what's needed to accommodate the subsequent growth in housing demand.”
Lawrence Yun, NAR Chief Economist
“The supply of existing homes barely increased to 4.0 months in January as a result of the slower pace of sales,” said Jonathan Smoke, Chief Economist at Realtor.com. “This January reading is the lowest January measure of supply since January 2005. We’ve now seen 41 straight months of tight supply. In conditions of tight supply, home values have strong support, but potential buyers will continue to face challenges finding a home for sale that meets their needs.”
According to Trulia Chief Economist Ralph McLaughlin, “Existing home sales stabilized in January after erratic month-over-month swings of -10.7% in November 2015 and +14.7% in December 2015. Though sales in January 2016 are up just 0.4% from December 2015, this modest increase is likely due exceptionally high levels of home sales in December. A large number of expected November homes sales spilled over into December because of delayed closings caused by TILA-RESPA Know Before You Owe lending regulations. This caused the normal volume in January to look comparatively small.”
With potential homebuyers facing a tough market this spring, H.R. 3700 (the Housing Opportunity Through Modernization Act) passed in the U.S. House of Representatives on February 2 by a vote of 243 to 184.
“This legislation contains a number of initiatives that put homeownership in reach for more families, including several reforms to current Federal Housing Administration restrictions on condominium financing,” said NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. “Now that the House has overwhelmingly voted in support of the bill, we look forward to working with our industry partners to advance it through the Senate.”