2015 Starts Slowly for Existing Home Sales

Existing home sales in January were disappointing to start the New Year, declining to their lowest rate in nine months.  The sales, which include completed sales of single-family homes, townhouses, condominiums, and co-ops, were down 4.9 percent from December's 5.7 million rate to a seasonally adjusted annual rate of 4.82 million. 

The rate of sales was the slowest since May 2014 when the annual pace was 4.90 million but sales were higher than a year earlier, up 3.2 percent. It was the fourth straight month that existing home sales bettered the score from the previous year.

Lawrence Yun, NAR chief economist, called the launch of the New Year somewhat disappointing and noted that January closings were down throughout the country. "January housing data can be volatile because of seasonal influences, but low housing supply and the ongoing rise in home prices above the pace of inflation appeared to slow sales despite interest rates remaining near historic lows," he said. "Realtors are reporting that low rates are attracting potential buyers, but the lack of new and affordable listings is leading some to delay decisions."

The numbers of available homes remain fairly stagnant.  The inventory increased 0.5 percent in January to 1.87 million existing homes but that number is 0.5 percent lower than one year ago.  Unsold inventory is at a 4.7-month supply at the current sales pace - up from 4.4 months in December.

Sales of existing single-family homes dropped 5.1 percent to a seasonally adjusted annual rate of 4.27 million in January from 4.50 million in December, but remained 3.9 percent above the 4.11 million pace a year ago.  Existing condo and co-op sales saw sales decline by 3.5 percent, from a 570,000 unit annual pace in December to 550,000 in January which was also 1.8 percent below sales in January 2014. 

NAR President Chris Polychron criticized what he called the Federal Housing Administration's (FHA's) overly restrictive approval process for condo purchases, saying it limits buyers' access to condos even though these properties are among the strongest in FHA's portfolio. "Condominiums offer an affordable option and are the first step to homeownership for many homebuyers," he said. "NAR has urged the FHA to develop policies that will give buyers access to more flexible and affordable financing opportunities and a wider choice of approved condo developments."

Homes continued a 35 month trajectory of rising prices.  The median price for all existing homes sold in January was $199,600, which is 6.2 percent above the January 2014 median. The median existing single-family home price was $199,800 in January, up 6.3 percent from January 2014 and the condo price was $198,300, a 5.3 percent annual increase.

"Although sales cooled in January, home prices continued solid year-over-year growth," adds Yun. "The labor market and economy are markedly improved compared to a year ago, which supports stronger buyer demand. The big test for housing will be the impact on affordability once rates rise."  

The percent share of first-time buyers declined to 28 percent in January, matching the most recent low in June 2014 and down from 29 percent in December. First-time buyers represented 26 percent of sales last January.  Individual investors purchased 17 percent of the homes sold in January, unchanged from December but down 3 percentage points from a year earlier.  Sixty-seven percent of investors paid cash for the homes they purchased and cash sales rose one percentage point from December to account for 27 percent of existing home transactions.  One year earlier a third of sales were all-cash.

Distressed sales made up 11 percent of existing sales in January compared to 15 percent a year earlier, 8 percent were foreclosures and 3 percent short sales.   Foreclosures sold for an average discount of 15 percent below market value in January while short sales were discounted 12 percent.  Discount levels were unchanged from December.

Properties typically stayed on the market slightly longer in January (69 days) than December (66 days) and a year ago (67 days). Short sales were on the market the longest at a median of 128 days in January, while foreclosures sold in 63 days and non-distressed homes took 68 days. Thirty percent of homes sold in January were on the market for less than a month.

Existing-home sales in the Northeast fell 6.0 percent to an annual rate of 630,000, but are 3.3 percent above a year ago. The median price in the Northeast was $247,800, a 2.7 percent annual increase.

In the Midwest, existing-home sales declined 2.7 percent to an annual level of 1.08 million in January, but are still 0.9 percent above January 2014. The median price in the Midwest was $151,300, up 8.2 percent from a year ago.

Sales in the South decreased 4.6 percent to an annual rate of 2.07 million in January, 5.6 percent above January 2014. The median price in the South was $171,900, 7.4 percent higher than a year ago.

Existing-home sales in the West dropped 7.1 percent to an annual rate of 1.04 million in January, but are still 1.0 percent above a year ago. The median price in the West was $291,800, which is 7.2 percent above January 2014.