Existing-home sales surged to a 10-year high in January, signaling a growing confidence in the economy.
Despite a nearly two-year shortage of available properties for sale, the first month of 2017 saw 5.69 million homes sold – a 3.3 percentage jump from 5.51 million in December. January’s sales pace, which was 3.8 percent higher than January 2016, is the strongest since February 2007, the National Association of Realtors (NAR) said Wednesday.
The numbers far surpassed the forecast of a 1.1 percent increase and a pace of 5.54 million, according to Reuters. Economists said a strong labor market with better employment opportunities for young adults, plus a growing economy, are the key factors for the boost.
“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," Lawrence Yun, NAR chief economist, said in a statement. "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."
Yet, the lack of homes on the market, which has been inflating prices and dragged down sales in December, continues to slow down the pace. While the number of homes on the market rose 2.4 percent to 1.69 million units last month, it is still down 7.1 percent from one year ago, declining for the 20th consecutive month on a year-over-year basis. NAR estimates that it will take 3.6 months to clear the current supply of homes on the market.
By contrast, year-over-year growth in prices has held steady for the past 59 months. The median price for all housing types, including single-family homes, townhomes, condominiums, and co-ops, reached $228,900 in January – 7.1 percent higher than one year ago and the fastest increase over the past 12 months.
Single-family homes sales continued to drive overall growth, as 89 percent of the total sales in January – 5.04 million – came from this category. Existing condominium and co-op sales leapt 8.3 percent – almost four times the 2.6 percent jump seen for single-family homes.
Existing home sales across the Northeast, the West, and the South experienced sturdy growth last month, whereas the Midwest saw a 1.5 percent decline. Across the country, the highest median home price of $332,300 was in the West. The South, though, saw the most dramatic price increase of 9.2 percent from January 2016.
The report also identifies several popular metropolitan markets. The three regions in California – San Jose-Sunnyvale-Santa Clara, San Francisco-Oakland-Hayward, and San Diego-Carlsbad – led the way, with all listed homes selling within 55 days.
Looking forward, economists expect more heated competition for homes in the lower- and mid-market price range, as “the combination of higher rates and prices led to households in over half of all states last month being able to afford less of all active inventory on the market based on their income,” according to Mr. Yun.