Sales of existing homes increased a mild 0.6% in January, according to data published by the National Association of Realtors (NAR) on Feb. 19. The increase marks two consecutive months of growth after pullback seen in the past year due to pandemic lockdowns.
Around 1.04 million homes went up for sale at the end of January, a drop of 26% from last year. There is now a 1.9-month supply of homes, the lowest since the NAR began tracking this metric in 1982. In 2020, there was more than a 3-month supply.
The current supply shortage is pushing the price of homes higher.
“Home sales continue to ascend in the first month of the year, as buyers quickly snatched up virtually every new listing coming on the market,” said Lawrence Yun, NAR’s chief economist in a statement. “Sales easily could have been even 20% higher if there had been more inventory and more choices.”
Yun said the housing sector is one of the “bright spots” of the U.S. economy since the onset of COVID-19.
“Home sales are continuing to play a part in propping up the economy,” Yun said. “With additional stimulus likely to pass and several vaccines now available, the housing outlook looks solid for this year.”
He expects more jobs to return, spurring home buying, and that housing sales will reach over 6.5 million by the end of the year. Notably, first-time buyers accounted for a third of home sales in January, up 32% from the prior-year period.
In New York City, a surge in contract activity backs these trends, according to Bloomberg. A Feb. 4 Douglas Elliman Real Estate report showed sales were up 30.8% in Manhattan compared to January 2020. In Brooklyn, sales are up 17.3% for the same period.
Unlike trends in the broader housing market, unsold inventory in the Big Apple has continued to push home prices down.
“Inventory has been at record highs, and buyers have had more options,” said Nancy Wu, an economist at StreetEasy, in an interview with Bloomberg. “What’s happening now is that sellers seem to be coming to terms with the fact that there’s record inventory on the market, and unless they reduce prices significantly, it won’t sell.”
In Massachusetts, healthy demand from buyers persisted through the first month of 2021, according to the Boston Business Journal (BBJ).
“A robust increase in housing starts in December points to an active year for new construction, but higher material costs, especially lumber, and a limited supply of buildable lots will temper the number of new units,” the Massachusetts Association of Realtors said in a report cited by BBJ.
In Tallahassee, home sales were up 15% in January compared to the prior-year period, according to Manausa Real Estate.
“The year-end rally that was fueled by buyers who opted out of the market when the COVID pandemic first hit Tallahassee in the first and second quarter continued through January,” the report said.
Low mortgage rates aided the jump. The report added that home bidding will “only escalate” now that Tallahassee has seen housing inventory reduce to a new all-time low.
Norada Real Estate Investments said in a Feb. 18 report that there are no indications that broader home price growth will slow.
“Zillow Economic Research predicts that annual home value growth will rise as high as 13.5% by mid-2021 and for home values to end 2021 up 10.5% from their current levels,” Norada said. “Their forecast also calls for sales volume to remain elevated in the coming year, finishing 2021 at 6.9 million sales, the most since 2005.”
Sacramento, San Jose, and Charlotte are among the top U.S. cities for 2021 sales and price growth benchmarked from last year, sitting at 24.6%, 21.6%, and 19%, respectively, according to Norada data.
In the Northeast, January 2021 witnessed existing-home sales fall 2.2%, a 24.3% increase from a year ago, NAR said. Existing-home sales in the Midwest inched up 1.9%. For the South, sales grew 3.2%, and a 4.4% increase was seen in the West.
The housing “demand dynamic” and ultra-low number of homes forecast a highly competitive homebuying season this spring, The Associated Press said in a Feb. 19 story.
“It’s not just a sellers’ market, it’s a super sellers’ market,” Odeta Kushi, deputy chief economist at First American, told AP. “This is an incredibly competitive homebuying environment.”
Norada’s report added that there were no signs of a mortgage-related housing market crash. An irrationally vast expansion of mortgage credit through the mid-2000s led to the global financial crisis of 2008.
“Mortgage rates and slow but steady improvements to the job landscape continue to propel confidence for first-time buyers. The pace of existing-home sales has jumped to a level not seen since 2006 and, importantly, was followed by strong pending sales, purchase mortgage applications and construction data.” In the past week, mortgage rates have jumped, according to FreddieMac data.
