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

After a brief withdrawal in December, home buyers have returned to the market, although they are still hampered by record low supply.

Closed sales of existing homes in January increased by 0.6% compared to December, according to the National Association of Realtors.

Sales ended the month with a seasonally adjusted annual rate of 6.69 million units, which was 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 supporting the economy,” said ANR chief economist Lawrence Yun. “With the additional stimulus likely to pass and more vaccines available now, the housing outlook looks solid for this year.”

At the end of January, there were 1.04 million homes for sale, down 26% from a year ago. At the current rate of sales, there is now a 1.9-month offer, the lowest since realtors began pursuing this value in 1982. A year ago, there was more than a 3-month offer.

Lack of supply in the face of strong demand continues to push prices higher and higher. The average price of an existing home sold in January was $ 303,900, an increase of 14.1% from January 2020. This is the highest January price ever recorded by real estate agents.

“We need to build more houses,” Yun said. “Even if housing starts to decline, it is interesting that housing permits, the desire to build houses, remain at the highest level in the last ten years.”

Activity was the slowest at the very low end of the market, home sales at prices below $ 100,000 down 28% year-on-year, and million-dollar home sales up 77%.

The days on the market continue to be very fast, with houses selling on average in 21 days. In January last year, homes were sold on average in 43 days.

Mortgage rates were close to record lows in December, when most contracts for these sales were signed. This has given buyers additional purchasing power, especially given the high house prices. However, in the last week, mortgage rates have risen sharply.

“Looking to the future, we expect demand to remain strong due to a large and growing cohort of buyers reaching the prime purchase age, but rising mortgage prices and rates – which have risen this week – could dampen buyers’ enthusiasm. what monthly costs are rising, “said Danielle Hale, chief economist at realtor.com.

Sales of newly built homes, which are measured by signed contracts, 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 are struggling to keep up with demand due to the recent rise in timber prices. It also records shortages of finished lots and skilled labor.