Existing home sales rebound, leaving record-low inventory
Economist suggests buyers were motivated to make a deal in anticipation of rising interest rates
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Existing home sales increased by 6.7% in January after a decline the month before, leaving record-low inventory as prices continue to climb, according to the latest data from the National Association of Realtors.
Homes sales rebounded in January, leaving record-low inventory. (AP Photo/Michael Conroy, File / AP Newsroom)
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Sales of previously occupied homes were up in all regions last month, reaching a seasonally adjusted annual rate of 6.5 million after falling in December. The rebound left a record-low inventory of 860,000 unsold units by the end of January.
"The inventory of homes on the market remains woefully depleted, and in fact is currently at an all-time low," said Lawrence Yun, NAR’s chief economist.
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Buyers were also willing to shell out more to make a deal last month, with sales prices surging 15.4% year-over-year to $350,300. Yun points to rising interest rates as the reason behind the trend.
A sale pending sign is displayed outside a residential home for sale in East Derry, New Hampshire. (AP Photo/Charles Krupa, File / AP Newsroom)
"Buyers were likely anticipating further rate increases and locking-in at the low rates, and investors added to overall demand with all-cash offers," he said. "Consequently, housing prices continue to move solidly higher."
FED SIGNALS ‘FASTER’ INTEREST RATE HIKES LIKELY AS INFLATION SOARS TO 40-YEAR HIGH
The average rate for a 30-year fixed-rate mortgage is approaching 4% according to Freddie Mac's latest weekly numbers, reaching 3.96% – a high not seen since May 2019. Rising rates are adding further fuel to the trend of would-be buyers increasingly being priced out of the market at the lower price points.
Last month, the percentage of first-time buyers responsible for sales dropped to 27%, down from 30% in December and down from 33% in January the year before according to the NAR.
A man walks past open house signs in front of condominiums for sale in Santa Monica, California. (REUTERS/Lucy Nicholson / Reuters Photos)
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"There are more listings at the upper end – homes priced above $500,000 – compared to a year ago, which should lead to less hurried decisions by some buyers," Yun explained. "Clearly, more supply is needed at the lower-end of the market in order to achieve more equitable distribution of housing wealth."