Existing-home sales ran at a seasonally adjusted annual pace of 5.69 million, the National Association of Realtors said Wednesday. That was 3.3 percent above an upwardly-revised 5.51 million in December and 3.8 percent higher than a year ago.
Total existing-home sales , which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, expanded 3.3 percent to a seasonally adjusted annual rate of 5.69 million in January from an upwardly revised 5.51 million in December 2016. January’s sales pace is 3.8 percent higher than a year ago (5.48 million) and surpasses November 2016 (5.60 million) as the strongest since February 2007 (5.79 million), which marked the end of the housing bubble.
Lawrence Yun, NAR chief economist, says January’s sales gain signals resilience among consumers even in a rising interest rate environment. “Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home,” he said. “Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions.”
But in fact interest rates have risen substantially only for the less than perfect credit holders, as my recent column has highlighted—those with credit scores below 700 with less than 20 percent down payment, and debt-to-income ratios below 30 percent.
The median existing-home price for all housing types in January was $228,900, up 7.1 percent from January 2016 ($213,700). This is yuge. January’s price increase was the fastest since last January (8.1 percent) and marks the 59th consecutive month of year-over-year gains.
Total housing inventory at the end of January rose 2.4 percent to 1.69 million existing homes available for sale, but is still 7.1 percent lower than a year ago (1.82 million) and has fallen year-over-year for 20 straight months. Unsold inventory is at a 3.6-month supply at the current sales pace (unchanged from December 2016).
It is a record low housing inventory of homes for sale, and means that housing construction hasn’t been able to keep up with the demand for housing, another reason prices are rising so fast and first-time homebuyers are having such a hard time finding affordable housing.
Then we have overly restrictive mortgage qualification standards, mainly because Fannie Mae and Freddie Mac, the main guarantors of conforming mortgages are still ‘owned’ by the US Treasury, which has imposed draconian fees on prospective borrowers with less than perfect credit scores.
NAR President William E. Brown talks about this problem that could possibly drag down inventory for would-be buyers even further in coming months. “Supply and demand imbalances continue to be burdensome in many markets, and now Fannie Mae is supporting a Wall Street firm’s investment in single-family rentals,” he said. “This will only further hamper tight supply and put major investors in direct competition with traditional buyers. Instead, the GSEs should lower overly burdensome fees (link is external) and help qualified borrowers become homeowners.”
“Competition is likely to heat up even more heading into the spring for house hunters looking for homes in the lower- and mid-market price range,” added Yun. “NAR and realtor.com®’s new ongoing research — the Realtors® Affordability Distribution Curve and Score — revealed that the combination of higher rates and prices led to households in over half of all states last month being able to afford less of all active inventory on the market based on their income.”
First-time buyers were 33 percent of sales in January, which is up from 32 percent both in December and a year ago. NAR’s 2016 Profile of Home Buyers and Sellers — released in late 2016 — revealed that the annual share of first-time buyers was 35 percent.
Much will depend on whether Janet Yellen’s Fed can continue to keep interest rates at their still historic lows. Conforming 30-year fixed rates are still obtainable at interest rates as low as 3.50 percent for those with credit scores above 740—those almost perfect credit score holders. It will be more difficult for the rest, unless the US Treasury eases its death grip on Fannie and Freddie, which would allow many more—as many as 1.1 million more to qualify for an affordable home, according to the Urban Institute.
Harlan Green © 2017
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen