While existing-home sales started the year off at the highest annual rate in six months, a lack of housing supply continues to hamper growth.
The National Association of Relators’ latest report showed total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, slightly increased 0.4% to a seasonally adjusted annual rate of 5.47 million in January from a downwardly revised 5.45 million in December.
Sales are now 11% higher than a year ago – the largest year-over-year gain since July 2013 (16.3%).
This slight increase comes after last month’s surge in sales due to closing delays in November caused by the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures rule in October.
Existing sales kicked off 2016 on solid footing, rising slightly to the strongest pace since July 2015 (5.48 million), Lawrence Yun, NAR chief economist, explained.
"The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints," Yun said. "Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession."
But with spring less than a month away, total housing inventory is still struggling to meet market demand, with inventory at the end of January slightly increasing 3.4% to 1.82 million existing homes available for sale. And this is 2.2% lower than a year ago (1.86 million).
Unsold inventory is at a 4-month supply at the current sales pace, up slightly from 3.9 months in December 2015.
"The spring buying season is right around the corner and current supply levels aren't even close to what's needed to accommodate the subsequent growth in housing demand," says Yun. "Home prices ascending near or above double-digit appreciation aren't healthy – especially considering the fact that household income and wages are barely rising."
The median existing-home price for all housing types in January was $213,800, up 8.2% from January 2015 ($197,600). Last month's price increase was the largest since April 2015 (8.5%), marking the 47th consecutive month of year-over-year gains.
Tuesday’s S&P/Case-Shiller report echoed similar concerns for the market’s lack of inventory, with home prices rising 5.4% since December 2015, stimulating more construction in the market.
Meanwhile, the share of first-time buyers stayed at 32% in January for the second consecutive month and is up from 28% a year ago. First-time buyers in all of 2015 represented an average of 30%, up from 29% in both 2014 and 2013.
All-cash sales made up 26% of transactions in January, up from 24% in December 2015, but down from 27% a year ago. Individual investors, who account for many cash sales, purchased 17% of homes in January (15% in December 2015), matching the highest share since last January.