Last year was an exceptional year for the housing market, which increased in the second half. The data from the National Association of Realtors in January’s existing home sales show the continuation of some of the same trends this year, as well as some important changes and increasing challenges.
Existing home sales in January reached a seasonally adjusted annual rate of 6.69 million, faster than the 6.61 million FactSet consensus expected, and a 0.6% increase from December’s revised rate. Sales increased by 23.7% compared to January last year.
That high rate shows that the resale market is still hot after home sales increased in the second half of the year. The seasonally adjusted rate for January is one of the highest since April 2006, second only to the rate reported in October 2020, Lawrence Yun, chief economist at the National Association of Realtors, told a news conference.
While single-family sales remained strong at 5.93 million, sales of apartments and co-operatives made a bigger leap. Sales of flats and co-operatives increased by 4.1% month-on-month and 28.8% year-on-year, compared to a single-family sales increase of 0.2% month-on-month and 23% year-on-year -on-year.
” Single families have had a lot of preference over homes over the past year, ” Yun said, ” but now the housing market is returning. ” Single-family homes still accounted for a much larger share of transactions in January, at 89% of all sales on an unadjusted basis.
Luxury leads the way
Single-family sales increased by 23% compared to January last year, but the picture differs according to the price point.
Homes between $ 250,000 and $ 500,000 were the majority of homes sold at 40.1%. Sales in this category increased by 27% year-on-year.
Affordable home transactions have shrunk. Home sales between $ 100,000 and $ 250,000 were 2% lower than in the same month last year, while home sales below $ 100,000 were down 28% compared to last year.
The largest growth was in homes priced at more than $ 1 million, of which sales grew by 77% compared to last year. “The growth in top-end sales is very strong, while declining in the lower price category, or that the increases are very small,” Yun said.
Buyers’ enthusiasm for higher price points could help explain the current house’s average selling price of $ 303,900 – a slight drop from previous months, but 14.1% higher than the average price a year ago.
Stock stays tight
A historically tight supply of existing homes for sale could contribute to transactions in 2020 – a trend that shows little sign of slowing down in 2021. The housing stock hit another record low in the first month of the new year, Yun said. to 1.04 million units. The offer of months, or how long it would take at the current selling price to sell each listed home, remains 1.9 months, equal to December, but lower than 3.1 months last year. “Sales may be even higher, but the stock is simply not there,” Yun said.
The strong domestic demand and a shortage of houses boosted the builders in 2020, but with effect from 2021, the industry is struggling with rising costs. Data for the construction of new homes in January, released earlier this week, showed a decline in the seasonally adjusted rate of housing, which the National Association of Home Builders attributed in part to the high price of materials. “We need to get more stock,” Yun said. “I know [builders] these wood prices and other material costs face it, but we need to build more homes to accommodate more supply. ”
Mortgage rates rise
Low inventory is not the only problem hanging over the residential real estate market as it approaches the spring sales season. Rising rates could also weigh on sales, Yun said, citing upward pressure on 10-year Treasury yields, a precursor to mortgage rates. ‘
This is not the first time that fears of higher mortgage rates have arisen during the Covid-19 crisis. Builder shares fell in October when the 10-year yield rose to a four-month high. At the time, the rise in 10-year yields had little effect on mortgage rates due to the extraordinarily wide spread between the two. But the distribution would continue to thin.
Mortgage rates began to rise in early January from their everyday lows. The average fixed interest rate of thirty years was 2.81% last week, according to Freddie Mac the highest point since mid-November. And buyers should not expect tariffs to fall, Yun said.
“It is inevitable that mortgage rates will rise in the coming months,” he said, citing factors such as more stimulus or improving the economic outlook as potential contributors to a ten-year rising Treasury yield.
While rates will rise, they will remain low by historical standards, Yun said. He predicts that mortgage rates could reach an average of 3% by mid-2021.
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