Sales of previously owned homes unexpectedly increased to a one-year high as buyers rushed in ahead of a surge in mortgage rates, further depleting tight inventories to a record low.
Contract closings increased 6.7% in January from the prior month to an annualized 6.5 million, figures from the National Association of Realtors showed Friday. All four regions saw gains on a monthly basis. The median forecast in a Bloomberg survey of economists called for a 6.1 million annualized rate in January.
“Buyers were likely anticipating further rate increases and locking-in at the low rates, and investors added to overall demand with all-cash offers,” Lawrence Yun, NAR’s chief economist, said in a statement Friday. “Consequently, housing prices continue to move solidly higher.”
With American demand for homes still outstripping supply, the current pace of sales depends in large part on the availability of properties. January’s increase in sales came almost entirely from homes priced above $500,000, and the recent spike in mortgage rates may temper future demand.
The number of homes for sale dropped to a record low 860,000 last month, down 2.3% from a month earlier and 16.5% lower than a year ago. At the current pace it would take 1.6 months to sell all the homes on the market, also an all-time low in NAR’s data. Realtors see anything below five months of supply as a sign of a tight market.
Amid the limited supply, affordability remains a persistent problem for Americans looking to buy. The median selling price rose 15.4% to $350,300 in January from a year ago. First-time buyers accounted for 27% of sales in January, hovering near a record low.
Cash sales represented 27% of all transactions last month and investors made up 22% of the market, crowding out first-time buyers.
Builders are racing to construct more homes, but high commodities prices, shipping delays and labor shortages have ballooned backlogs and restrained building activity.
Digging Deeper
- Properties remained on the market for an average of 19 days last month, compared to 21 days a year earlier
- Existing condominium and co-op sales rose 8.8%
- Sales of previously owned single-family homes increased 6.5% from the prior month, while those prices rose 15.9% from a year ago
- Existing-home sales account for about 90% of U.S. housing and are calculated when a contract closes. New-home sales, which make up the remainder, are based on contract signings and January data will be released next week
