Sales of existing homes rose slightly in January, but the low supply is weighing on the market

After a brief downturn in December, homebuyers returned to the market, although they are still held back by low supply.

According to the National Association of Realtors, sales of existing homes are up 0.6% in January from December.

Sales ended the month at a seasonally adjusted, annualized pace of 6.69 million units, which was 23.7% higher than January 2020, the second highest sales pace since April 2006.

“Home sales continue to play a role in supporting the economy,” said Lawrence Yun, chief economist at the NAR. “With additional incentives likely to pass and with several vaccines now available, the housing outlook looks solid this year.”

At the end of January, 1.04 million homes were for sale, a decrease of 26% compared to a year ago. At the current sales rhythm, there is now a stock of 1.9 months, the lowest since brokers started following this measure in 1982. A year ago there was more than a 3 month supply.

The lack of supply in the face of strong demand continues to push prices higher and higher. The median price of an existing home sold in January was $ 303,900, up 14.1% from January 2020. That’s the highest January price the real estate agents have ever recorded.

“We need to build more houses,” said Yun. “While housing construction is starting to decline, it is interesting that housing permits, the desire to build housing, is the highest in more than a decade.”

Activity was slowest at the bottom of the market, with home sales at less than $ 100,000 down 28% year over year, and $ 1 million home sales down 77%.

Days on the market continue to be very fast, with homes selling on average in 21 days. Last January, homes were sold in an average of 43 days.

Mortgage rates were near record lows in December, when most of the contracts for these sales would have been signed. That gave buyers extra purchasing power, especially given sky-high house prices. However, mortgage rates have risen sharply in the past week.

“Looking ahead, we expect demand to remain strong thanks to a large and still growing cohort of buyers reaching their best buying age, but rising prices and mortgage rates – which have skyrocketed this week – could dampen buyers’ enthusiasm as monthly costs rise , ”said Danielle Hale, chief economist at realtor.com.

Sales of new build homes, measured by signed contracts and not hookups, rose 15% year-on-year in November, which was the latest reading. New home builders are taking advantage of the severe shortage of existing homes for sale, but are struggling to keep up with demand due to a recent spike in wood prices. They also see a shortage of finished lots and skilled labor.