Existing Home Sales Fall 5.1% In January 2014, To Lowest Level Since July 2012
Existing home sales dropped 5.1% in January, hitting their lowest levels since July 2012, according to data released Friday by the National Association of Realtors. In addition to the winter weather, the NAR blamed rising home prices and mortgage rates, as well as the ongoing inventory shortage.
In January, existing home sales dropped to an annualized rate of 4.62 million (seasonally adjusted), down from 4.87 million (seasonally adjusted) in December 2013. January’s rate is 5.1% below December’s, and also 5.1% below the rate one year earlier. Sales have not been so slow since July 2012, when the annualized rate (seasonally adjusted) was 4.59 million.
The NAR’s Existing home sales data tallies of the number of sales of previously-owned single-family homes, townhomes, condominiums and co-ops that close during a given month. Since resales account for a greater share of the housing market than new homes, the measure is considered a market bellwether.
Friday’s news is not exactly surprising, given this winter’s horrific weather. “Disruptive and prolonged winter weather patterns across the country are impacting a wide range of economic activity, and housing is no exception,” said Lawrence Yun, NAR chief economist, in a release.
NAR President Steve Brown, co-owner of Irongate, Inc., Realtors in Dayton, Ohio, pointed out an additional weather-related problem contributing to the weak numbers: higher flood insurance rates in flood zones, which account for about 8 to 9% of sales. “Thirty percent of transactions in flood zones were cancelled or delayed in January as a result of sharply higher flood insurance rates,” Brown said.
Of course, weather isn’t the only factor. Prices are going up, inventory is low, and mortgage rates rising. The median existing-home price in January was $188,900, up 10.7% from one year earlier. The median price for an existing condo was $188,700 in January, a 13% year-over-year jump.
Although inventory rose 2.2% in January from the prior month, the 1.9 million existing homes available for sale represent only a 4.9-month supply at the current sales pace. An inventory level of about six-months is considered healthy. Mortgage interest rates (30-year conventional, fixed-rate) were slightly down in January, falling to 4.43% from December’s 4.46% level. However, that’s still significantly above the 3.41% rate offered to buyers in January 2013.
“These issues will hinder home sales activity until the positive factors of job growth and new supply from higher housing starts begin to make an impact,” Yun noted.
The confluence of factors seems to be keeping first-time home-buyers out of the market. January 2014 marks the lowest market share for this group since NAR began tracking the measure in October 2008. In January first-time buyers comprised 26% of existing-home purchases, down from 27% in December and 30% one year earlier. Normally, they should be closer to 40% of the overall market.
In one bright spot, distressed sales continue to fall. Foreclosures and short sales accounted for 15% of January’s sales, compared with 14% in December but 24% in January 2013. Of the total distressed sales last month, 11% were foreclosures and 4% short sales. A full 33% of existing home sales transactions in January were purchased with all cash.
The pace of home sales dipped from December in every region of the country in January. Year-over-year, only the South saw higher sales, with a 1.6% increase from January 2013. The median price for January sales in the Northeast was $241,100, up 6.6% from a year ago. The median price in the Midwest was $140,300, 7.6% percent higher than in January 2013. In the South, the median price was $161,500, up 9.4 percent from a year ago. And in the West, where inventory is particularly tight, the median price jumped 14.6% from one year earlier, to $273,500.