Last year was an exceptional one for the real estate market, which grew in the second half. Existing sales data from the National Association of Realtors in January 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 FactSet consensus of 6.61 million and an increase of 0.6% from the revised rate in December. Sales increased by 23.7% compared to January last year, the statement said.
This high rate shows that the resale market is still hot after home sales rose in the second half of the year. The seasonally adjusted rate for January is one of the highest since April 2006, second only to the rate reported in October 2020, Lawrence Yun, chief economist at the National Association of Realtors, said in a conference call with reporters.
While single-family sales remained strong at 5.93 million, sales of apartments and co-operatives jumped higher. Sales of apartments and cooperatives increased by 4.1% month-on-month and by 28.8% each year, compared to an increase in single-family sales of 0.2% per month per month and 23% each year.
“The single family has been much preferred over the condo in the last year,” Yun said, “but now the condo market is back.” Single-family homes continued to account for a much larger share of transactions in January, with 89% of total sales on an unadjusted basis.
Luxury leads the way
Sales of single-family homes increased by 23% compared to January last year – but the picture varies by price.
Homes priced between $ 250,000 and $ 500,000 accounted for most of the homes sold at 40.1%. Sales in this category increased by 27% year-on-year.
More affordable home transactions have declined. Home sales at prices between $ 100,000 and $ 250,000 were 2% lower than in the same month last year, while home sales below $ 100,000 were down 28% from January.
The biggest increase came from homes priced over $ 1 million, with sales up 77% from January last year. “Top-level sales growth is very strong, while in the lower price category, it is either low or the growth is very small,” Yun said.
Buyers’ enthusiasm for higher prices could explain the average selling price of existing homes of $ 303,900 – a slight decrease from previous months, but 14.1% higher than the average price a year ago.
The inventory remains tight
A historically tight 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 hit another low in the first month of the new year , Yun said on call, down to 1.04 million units. The offer of months or how long it would take in the current pace of sales to sell each listed house, remained at 1.9 months in December, but down from 3.1 months last year. “Sales could be even higher, but just the inventory isn’t just there,” Yun said.
Strong housing demand and short supply have given builders a boost in 2020 – but as of 2021, the industry is facing rising costs. January data on new home construction released earlier this week showed a decline in the seasonally adjusted rate of housing starts, which the National Association of Home Builders attributed in part to the high price of materials. “We need to get more inventory,” Yun said on appeal. “Know [builders] we are facing these timber prices and other material costs, but we need to build more houses to bring more supply. ”
Mortgage rates are rising
Low inventory is not the only concern hanging on the residential real estate market as it approaches the spring sales season. Rising rates could also affect sales, Yun said, citing upward pressure on the 10-year Treasury yield, “a forerunner of mortgage rates.”
This is not the first time the Covid-19 crisis has raised concerns about higher mortgage rates. Builders’ shares fell in October as the 10-year yield rose to a four-month high. At the time, the 10-year yield increase did not have much effect on mortgage rates due to the unusually large difference between the two. But the spread will continue to thin.
Mortgage rates began to rise from their all-time lows in early January. The 30-year average fixed-rate mortgage rate was 2.81% in the last week, the highest point since mid-November, according to Freddie Mac. And buyers shouldn’t expect rates to drop, Yun said.
“It is inevitable that mortgage rates will rise in the coming months,” he said, citing factors such as more stimulus or improved economic prospects as potential contributors to the 10-year increase in Treasury yields.
While rates will rise, they will remain low by historical standards, says Yun. He predicts that mortgage rates could reach an average of 3% by mid-2021.
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