Existing home sales started out fast in 2017, reaching a recent cyclical high and increasing to the fastest pace in nearly a decade, according to the new report from the National Association of Realtors.
Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 3.3% in January to a seasonally-adjusted rate of 5.69 million. This is up from 5.51 million sales in December, and up 3.8% from last year’s 5.48 million, marking the highest rate since February 2007’s 5.79 million.
“With the exception of an unusually harsh and wintry December, existing home sales have now strongly beat expectations in four out of the past five months, as buyers took advantage of slightly better weather and slightly lower mortgage interest rates in January,” Zillow Chief Economist Svenja Gudell said.
These sales gain signals resilience among consumers even in a rising interest rate environment, according to NAR Chief Economist Lawrence Yun.
“Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home,” Yun said. “Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions.”
Home prices continue to rise for all housing types, hitting $228,900 in January. This is up 7.1% from last year and the fastest price increase since last January. It also marks the 59th consecutive month of year-over-year gains.
“While strong price gains are positive for owners of homes, and help to reduce the number of homeowners who owe more on their mortgage than the market value of their home, it is a negative for affordability.” Nationwide Chief Economist David Berson said. “We have concerns that continued supply constraints in the housing market will allow outsized house price gains again in 2017, especially hurting potential first-time homebuyers.”
But as home prices increase, housing inventory remains down 7.1% from last year’s 1.82 million, marking the 20th consecutive month of annual declines. However, inventory increased 2.4% from December to 1.69 million in January. Inventory remains at a 3.6-month supply at the current sales pace, unchanged from December.
“Competition is likely to heat up even more heading into the spring for house hunters looking for homes in the lower- and mid-market price range,” Yun said.