Existing home sales started the year off right, posting a 3.1% increase month over month to reach a seasonally adjusted annual rate of 4.00 million in January, according to the latest figures from the National Association of Realtors (NAR).
Year over year, the tune remains much the same, with January’s resale rate down 1.7% from the same month in 2023. But while the rebound from December’s disappointing sales was a modest one, January’s pace was still the fastest since August. And January’s annualized pace surpassed consensus expectations, with economists polled by Reuters predicting home resales growing to a rate of 3.97 million units.
The descent of mortgage rates in the last few months of 2023 precipitated the uptick, as contracts signed when rates dropped in last year’s fourth quarter began closing and coalescing into actualized transactions. Indeed, January’s existing home sales jump was predicted in part by December’s pending home sales, which were up 8.3% in January.
A moderate gain in inventory also helped raise the sales tide in January, with total housing inventory registered at the end of January at 1.01 million units. That’s up 2.0% from December and 3.1% from January 2023. Unsold inventory at the current sales pace is at a supply of 3.0 months, down from 3.1 months in December, but up from 2.9 months year over year.
“While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand,” said Lawrence Yun, chief economist at the NAR. “Listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year.”
Limited inventory is, however, still pushing sales prices upward. The median resale price in January was $379,100, up 5.1% from the same month last year.
“The median home price reached an all-time high for the month of January,” Yun added. “Multiple offers are common on mid-priced homes, and many homes were still sold within a month. The elevated share of cash deals – 32% – indicated a market full of multiple offers and propelled by record-high housing wealth.”
Even with January’s improvement, low supply will continue to dictate the market’s ceiling until a meaningful influx materializes — as will the Federal Reserve’s action (or lack thereof) in adjusting interest rates, according to Selma Hepp, chief economist at CoreLogic.
“Existing home sales will continue to be constrained in the foreseeable future as the supply of homes remains tight and sellers continue to wait for lower mortgage rates,” she said. “All eyes are on the Fed now to cut rates this summer in order to provide relief to the buyers as well as stubborn sellers. Should they do so, existing home sales should expect a better outlook for the remainder of the year.”
