NAR: Existing-Home Sales Increased 3.8% In 2016
Existing-home sales, including sales of single-family homes, townhouses, condominiums and co-ops, were at a seasonally adjusted annual rate of 5.69 million in January – an increase of 3.3% compared with an upwardly revised 5.51 million in December and an increase of 3.8% compared with 5.48 million in January 2016, according to the latest available figures from the National Association of Realtors (NAR).
It was the strongest month for existing-home sales since February 2007, when they reached an annual pace of about 5.79 million, NAR says.
Looking at the four regions tracked in NAR’s monthly home sales report, sales in the West increased 6.6% compared with December; sales in the Northeast jumped 5.3%; and sales in the South rose 3.6%. Only the Midwest saw a decrease – existing-home sales there were down 1.5%, month over month.
The median price for all housing types in January was $228,900, an increase of 7.1% compared with $213,700 in January 2016.
As of the end of January, there were about 1.69 million existing homes available for sale – an increase of 2.4% compared with December but a decrease of 7.1% compared with one year earlier. That’s about a 3.6-month supply at the current sales pace (unchanged from December).
About 33% of all existing-home sales in January were to first-time buyers – the average for 2016 was 35%.
About 23% of all existing-home sales were all-cash transactions – up from 21% in December but down from 26% a year earlier. Individual investors, who account for many cash sales, purchased 15% of homes in January – unchanged from December but down from 17% a year ago. About 59% of investors paid in cash in January.
Distressed sales, including foreclosures and short sales, accounted for about 7% of existing-home sales in January – unchanged from December but down from 9% a year ago.
Lawrence Yun, chief economist for NAR, characterized the 3.3% month-over-month increase in home sales as “a prosperous start” to 2017. He indicated that the increase was rather remarkable when one considers that home buyers faced “inventory levels that are far from adequate and deteriorating affordability conditions.”
Pending Home Sales Fall To Lowest Level In A Year
Pending home sales fell 2.8% in January, to a score of 106.4 in the National Association of Realtors’ (NAR) Pending Home Sales Index.
That’s down from an upwardly revised score of 109.5 in December and the lowest since January 2016.
Contract signings increased 2.3% in the Northeast and 0.4% in the South; however, they fell 5.0% in the Midwest and 9.8% in the West.
The culprit, according to Lawrence Yun, chief economist for NAR, is a lack of supply, coupled with a lack of affordability.
“The significant shortage of listings [in January], along with deteriorating affordability as the result of higher home prices and mortgage rates, kept many would-be buyers at bay,” Yun says in a statement. “Buyer traffic is easily outpacing seller traffic in several metro areas and is why homes are selling at a much faster rate than a year ago. Most notably in the West, it’s not uncommon to see a home come off the market within a month.”
Despite these headwinds, consumer interest in homeownership is the highest it has been since the Great Recession. Heads of households are feeling more confident about their financial situations – job growth is strong in most of the country, and the stock market has seen record gains in recent months.
“January’s accelerated price appreciation is concerning because it’s over double the pace of income growth, and mortgage rates are up considerably from six months ago,” Yun says. “Especially in the most expensive markets, prospective buyers will feel this squeeze to their budget and will likely have to come up with additional savings or compromise on home size or location.”
As of February, NAR was forecasting that existing-home sales would reach 5.57 million this year – an increase of 2.2% compared with 5.45 million in 2016.
The national median existing-home price this year is expected to increase around 4.0%. In 2016, existing sales increased 3.8%, and prices rose 5.1%.
“Sales got off to a fantastic start in January, but [the] retreat in contract signings indicates that activity will likely be choppy in coming months as buyers compete for the meager number of listings in their price range,” Yun adds.
January Housing Starts Down 2.6%
Housing starts in January were at a seasonally adjusted annual rate of about 1.246 million, a decrease of 2.6% compared with a revised December rate of about 1.279 million but an increase of 10.5% compared with a rate of 1.128 million seen in January 2016, according to estimates released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
The decrease in January – which is normally a slow month for new home construction – follows an unexpected increase of 11.3% in December, which was one of the strongest monthly jumps in new home construction seen in 2016. Most of that increase, however, was in multifamily starts.
Still, 2016 was a much better year for housing starts than 2015, and overall production seems to be improving.
Starts of single-family homes in January were at a rate of 823,000, an increase of 1.9% compared with a revised December figure of 808,000. Starts of multifamily units (five or more units per building) were at a rate of about 421,000, a decrease of 7.9% compared with about 457,000 in December.
New construction appears to be poised for an increase in the coming months: Building permits were at a seasonally adjusted annual rate of 1.285 million, an increase of 4.6% compared with the revised December rate of 1.228 million and an increase of 8.2% compared with 1.188 million in January 2016.
Permits for single-family homes were at a rate of about 808,000, a decrease of 2.7% compared with a revised 830,000 in December. Permits for multifamily dwellings were at a rate of about 446,000, an increase of 23.5% compared with 361,000 in December.
New Home Sales Up In January Despite Tight Inventory
New home sales in January were at a seasonally adjusted annual rate of about 555,000, an increase of 3.7% compared with a revised rate of about 535,000 in December and an increase of 5.5% compared with about 526,000 in January 2016, according to estimates released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
The median sales price of new homes sold in January was $312,900. The average sales price was $360,900.
As of the end of the month, there were about 265,000 new homes available for sale – about a 5.7-month supply at the current sales rate.
About 44,000 new homes were sold in the Northeast in January; that’s an increase of 15.8% compared with about 38,000 in December.
About 70,000 new homes were sold in the Midwest – an increase of 14.8% compared with about 61,000 in December.
About 290,000 new homes were sold in the South during the month – that’s up 4.3% compared with about 278,000 in December.
And about 151,000 new homes were sold in the West – down 4.4% compared with about 158,000 in December.
“This increase in new home sales is in line with our forecast for a steady, gradual recovery of the housing market,” says Granger MacDonald, chairman of the National Association of Home Builders (NAHB), in a statement. “However, the pace of growth may be hampered by supply-side headwinds, such as shortages of lots and labor.”
“We can expect further growth in new home sales throughout the year, spurred on by employment gains and a rise in household formations,” adds Robert Dietz, chief economist for NAHB. “As the supply of existing homes remains tight, more consumers will turn to new construction.”
Case-Shiller: U.S. Home Prices Increased 0.7% In December
Home prices increased 0.7% on an adjusted basis in December compared with November and increased 5.8% compared with December 2015, according to the S&P CoreLogic Case-Shiller U.S. National Home Price index.
The index’s 10-city and 20-city composites each saw home prices increase 0.9%, on an adjusted basis, month over month.
On an unadjusted basis, home prices increased 0.2% in December compared with November.
The 10-city and 20-city composites each posted a 0.3% increase, on an unadjusted basis, month over month.
Eighteen of the 20 cities reported increases in December, before seasonal adjustment. After seasonal adjustment, all 20 cities saw prices rise.
Seattle; Portland, Ore.; and Denver reported the highest year-over-year gains among the 20 cities over the 11 months leading up to December. Seattle led the way, with a 10.8% year-over-year price increase in December, followed by Portland, with 10.0%, and Denver, with 8.9%. Twelve cities reported greater price increases in the year ended December versus the year ended November.
“Home prices continue to advance, with the national average rising faster than at any time in the last two-and-a-half years,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in a statement. “With all 20 cities seeing prices rise over the last year, questions about whether this is a normal housing market or if prices could be heading for a fall are natural.
“In comparing current home price movements to history, it is necessary to adjust for inflation,” Blitzer continues. “Consumer prices are higher today than 20 or 30 years ago, while the inflation rate is lower. Looking at real or inflation-adjusted home prices based on the S&P CoreLogic Case-Shiller National Index and the Consumer Price Index, the annual increase in home prices is currently 3.8 percent. Since 1975, the average pace is 1.3 percent; about two-thirds of the time, the rate is between -4 percent and +7 percent. Home prices are rising, but the speed is not alarming.”