Existing-Home Sales Come Up Short

Existing-Home Sales Come Up Short

"We expect a clear rebound in sales over the next few months, but the outlook for the second half (of the year) is more cloudy".

Washington, DC, February 21, 2018-Total existing-home sales sank 3.2% in January to a seasonally adjusted annual rate of 5.38 million from a downwardly revised 5.56 million in December 2017, according to the National Association of Realtors.

That was also the lowest inventory for January on record.

U.S. sales of existing homes slumped in January, falling for the second straight month and posting the largest decline in three years amid a shortage of affordable options, according to industry figures released Wednesday. Inventory is still down 9.5 percent from a year earlier and - according to Zillow data - most of the inventory gains have been among homes priced in the upper third of the market, not entry-level homes. The amount of inventory has fallen year-over-year for 32 consecutive months.

The average 30-year fixed mortgage rate reached 4.38 percent last week, the highest in almost four years.

The average price for a home in January (all housing types) was $240,500, up 5.8% from $227,300 in January 2017. "While the good news is that REALTORS® in most areas are saying buyer traffic is even stronger than the beginning of previous year [according to the REALTORS® Confidence Index], sales failed to follow course and far lagged last January's pace".

The supply squeeze and rising mortgage interest rates are stoking fears of a lackluster spring selling season. Single-family home sales in the West fell 5.7 percent to 1 million units (SAAR) and single-family home sales in Midwest fell by 6.4 percent to 1.17 million units (SAAR). Single-family home completions were the highest since June 2008. Economists often describe a "balanced" market as one with five to seven months worth of inventory. That means about 39,500 more homes were on the market in January than in December.

"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.

Analysts say the housing market is exceedingly tight, with a decade of economic recovery and a recent uptick in wages producing strong demand, that coupled with scarce labor in construction and rising input costs, is holding back the pace of construction.

A six-to-seven-month supply is viewed as a healthy balance between supply and demand. "Beginning the home search now could lead to a successful and less stressful buying experience".

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