In January, the real estate market witnessed a significant uptick in the sale of existing homes, a positive movement attributed to the dip in mortgage interest rates observed in the preceding months of November and December. The inventory for available properties saw a slight increase, with 1.01 million units recorded, marking a 3.1% rise from the same period in the previous year, January 2023. Despite this increase, the market still faced a shortage, with only a three-month supply of homes, indicating a persistent imbalance favoring sellers.
The pricing dynamics of the housing market continued to escalate, with the median price for all types of existing homes reaching $379,100 in January. This represented a 5.1% surge from the year before, setting a new record for January. This price elevation was consistent across all regions in the U.S., with a notable 16% of homes being sold for more than their listing price.
The National Association of Realtors (NAR) reported a 3.1% increase in previously owned home sales, reaching 4 million units on an adjusted annualized basis, despite a slight 1.7% decrease from the previous year. This sales activity primarily resulted from agreements signed during the lower mortgage rate months of November and December, when rates had momentarily eased from an October high of 8% to around 6.6% by mid-December. However, rates have since climbed above 7%, as noted by Mortgage News Daily.
Lawrence Yun, the Chief Economist at NAR, expressed optimism about the January figures, highlighting them as an indication of a market moving towards a balance between supply and demand, spurred by the modest increase in listings and the advantageous lower mortgage rates compared to the end of the last year.
A significant aspect of the current market is the intense competition, especially for mid-priced homes, leading to multiple offer situations and a notable percentage of homes being sold within a month. The prevalence of all-cash purchases, which accounted for 32% of all sales, underscores the competitive nature of the market and marks the highest cash transaction share since June 2014.
The market's dynamics have also impacted first-time homebuyers, who constituted only 28% of sales, a stark contrast to the historical average of around 40%. The scarcity of affordable homes has been particularly challenging for this group.
Despite the positive momentum in January, the resurgence of higher mortgage rates poses a renewed challenge for the housing market. A report from Redfin highlighted a 10% year-over-year increase in new listings in the four weeks leading up to February 18, representing the most substantial growth in two months. However, the same report indicated a 7% decline in signed contracts compared to the previous year, suggesting that the effects of higher mortgage rates are beginning to weigh on market activities again.
Source: CNBC, MMCG research, Bloomberg
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