Existing-home sales tumbled in January to the lowest level in a year and a half as inventory shortages push home prices higher, the latest data from the National Association of Realtors announced.
Last month, home sales left the industry hanging on the potential of improvement if the job market reported enough growth to offset a rise in rates.
But January’s figures ended up falling and cancelling out any improvement seen in December.
Total existing-home sales — completed transactions that include single-family homes, townhomes, condominiums and co-ops — decreased 5.1% to a seasonally adjusted annual rate of 4.62 million in January from 4.87 million in December. Additionally, it came in 5.1% below the 4.87 million-unit pace in January 2013 and posted the slowest level of activity since July 2012, when it stood at 4.59 million.
While unusual weather is playing a role in the market, Lawrence Yun, NAR chief economist, said, “We can’t ignore the ongoing headwinds of tight credit, limited inventory, higher prices and higher mortgage interest rates. 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.”
Meanwhile, median existing-home price for all housing types in January reached $188,900, up 10.7% from January 2013.
Distressed homes, which are foreclosures and short sales, accounted for 15% of January sales, compared with 14% in December and 24% in January 2013.
Furthermore, total housing inventory at the end of January increased 2.2% to 1.90 million existing homes available for sale, representing a 4.9-month supply, up from 4.6 months in December.
Unsold inventory is 7.3% above a year ago, when there was a 4.4-month supply. As a standard, a supply of 6.0 to 6.5 months represents a rough balance between buyers and sellers.
However, January threw a new twist into the system.
In addition to disruptive weather, higher flood insurance rates are impacting the market in areas designated as flood zones, which account for roughly 8% to 9% of sales, NAR President Steve Brown, explained.
“Thirty percent of transactions in flood zones were cancelled or delayed in January as a result of sharply higher flood insurance rates,” Brown said. “Since going into effect on October 1, 2013, about 40,000 home sales were either delayed or cancelled because of increases and confusion.”
In light of this, Congress is considering legislation to halt new flood insurance rates so the Federal Emergency Management Agency can complete an affordability study and determine the full impact of the law.
Despite these additional factors, the median time on market for all homes was 67 days in January, down from 72 days in December and 71 days on market in December 2013.
Short sales stayed on market for a median of 150 days in January, while foreclosures typically sold in 58 days and non-distressed homes took 66 days.