January marked the 12th consecutive month of declining sales of existing homes in the US, the longest such stretch since 1999. According to the National Association of Realtors, existing home sales dropped to a seasonally adjusted annual rate of four million units last month, the lowest level since October 2010. This was a 0.7 percent decrease from the previous month, and a 36.9 percent decrease from the same time last year.
The Northeast and Midwest saw a decrease in sales, while the South and West saw an increase. NAR chief economist Lawrence Yun said that “home sales are bottoming out”, but it will be some time before the housing market turns around. This is due to government data showing a decrease in single-family homebuilding and permits for future home construction in January.
Mortgage rates have also been on the rise, with the 30-year fixed mortgage rate increasing to an average 6.32 percent last week from 6.12 percent the prior week. This is due to recent strong data on retail sales and inflation raising fears that the Federal Reserve could continue raising interest rates after the middle of the year.
The median existing house price increased 1.3 percent from a year earlier to $359,000 in January. There were 980,000 previously owned homes on the market, up 2.1 percent from December and 15.3 percent from a year ago. Properties typically remained on the market for 33 days last month, up from 26 days in December. Fifty-four percent of homes sold in January were on the market for less than a month.
First-time buyers accounted for 31 percent of sales, up from 27 percent a year ago. All-cash sales made up 29 percent of transactions compared to 27 percent a year ago. At January’s sales pace, it would take 2.9 months to exhaust the current inventory of existing homes, up from 1.6 months a year ago.
The US housing market has been struggling due to the Federal Reserve’s aggressive interest rate hiking campaign, resulting in residential investment contracting for seven straight quarters. However, there is cautious optimism that the slump could be close to reaching a bottom, as evidenced by homebuilders’ sentiment rising to a five-month high in February. It will take some time for the housing market to recover, but it appears that it is headed in the right direction.