Existing-Home Sales Fell 3.2% in January on Tight Inventory

Ivan Schwartz
February 22, 2018

Even amid reports that buyer traffic is picking up, sales still lagged last January's pace.

As of the end of January, here were about 1.52 million existing homes available for sale, about a 3.4-month supply at the current sales pace.

While sales were down, prices were up. January marked the 71st straight month of year-over-year gains. However, December inventory was revised downward by about 2,000 units to 1.68 million units (SAAR), and that revision accounts for about 5 percent of the month-over-month increase in on-market inventory. "While the good news is that Realtors in most areas are saying buyer traffic is even stronger than the beginning of previous year, sales failed to follow course and far lagged last January's pace. It's very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth". Existing-condo and -co-op sales came in at 620,000, a 1.6 percent increase from December, but a 4.6 percent decrease from one year prior. Year-over-year, single-family existing home sales are down 9.1 percent in the West compared to 7.6 percent in the Northeast, 4.1 percent in the Midwest and 2 percent in the South.

But housing supply could improve in the coming months as government data last week showed the number of homes under construction surged to near a 10-1/2-year high in January. "These two factors will hopefully lay the foundation for the building industry to meaningfully ramp up production as this year progresses".

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The average rate for a 30-year fixed-rate mortgage rose for the fourth straight month to 4.03 percent in January from 3.95 percent in December, according to Freddie Mac.

The supply squeeze and rising mortgage interest rates are stoking fears of a lackluster spring selling season.

First-time homebuyers comprised 29 percent of existing-home sales in January, down from 32 percent in December. Over the past year, the West has seen the strongest price gains, and the median price of homes sold in the West is now $380,800 - nearly $100,000 more than the median price of existing homes sold in the next-priciest region, the Northeast ($281,300) and nearly double the median price of existing homes sold in the Midwest ($207,000).

"We have hoped that the rise in rates motivates home buyers to act soon but the move in rates may have been so drastic that they are now waiting to see if rates start to make a move down", said Brian Surgener, a senior vice president at BBMC Mortgage in Lombard, Illinois. "Beginning the home search now could lead to a successful and less stressful buying experience".

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