According to the National Association of Realtors, January sales of homes that were previously owned rose 6.7% compared to December. This was a seasonally adjusted annualized rate of approximately 6.5 Million units. Wall Street was not expecting this. The January 2021 sales were 2.3% less than the January 2021.
A record-breaking 16.5% decrease in the supply of available homes has caused the stock to fall from one year ago. At the end January, there were only 860,000 available homes. It would only take 1.6 months for that inventory to be sold at the current pace of sales. Balanced markets are those with a supply of 4-6 months. This is also an all-time low.
“Seller traffic remains very low. It suggests that inventories are struggling to turn the corner. Multiple bidding wars continue to be reported by Realtors,” stated Lawrence Yun (chief economist at the Realtors).
The median sale price for a house in January was $350,000. This represents a 15.4% increase over the January 2021 average.
This price may be influenced by the fact the majority of sales activity takes place at the high end of the market. The lowest end of the market has the most supply. The price of homes between $100,000 to $250,000 was down 23% compared with a year earlier, but sales for homes between $750,000-$1 million rose 33%. Homes priced over $1,000,000 saw 39% more sales.
Also, homes are selling quickly with an average of 19 days for them to be under contract. In comparison to 21 days on the market last year, which was when the market was strong, it was only 21.
These sales were based upon contracts that were signed between November and December before the rise in mortgage rates. In that same time, the average 30-year fixed-rate rate was just 3.2%. According to Mortgage News Daily, it’s now just above 4%.
From 19% last year, the share of all cash sales rose to 27%. This may partly be due to an increase in investor participation to 22%, from 15% last year.
Yun stated that “investors are popping out” and may explain why there is a surge in home sales.
According to Danielle Hale (chief economist at Realtor.com), “The big question is whether rising interest rates will reduce housing demand, which stems in large part from a demographic tsunami of young households at key age points for homebuying.” We expect that home sales will remain high through 2022 as post-pandemic changes like increased workplace flexibility and expanding geographic reach allow would-be home buyers to find affordable places to call their own.
The December sales of new-built homes, which is counted as closings but contracts signed within the month, rose nearly 12% from November. Due to the low number of available homes, more buyers are choosing new construction. As a result, builders cannot keep up with the demand. Supply chain issues and labor problems slow down production.