LOS ANGELES (AP) — Sales of previously occupied homes rose in January as a surge in buyers with cash and others eager to avoid higher mortgage rates took up properties, leaving the number of homes available on the market at an all-time high.
Sales of existing homes rose 6.7% last month from December to a seasonally adjusted annual rate of 6.5 million, the National Association of Realtors said Friday. That’s more than the roughly 6.08 million in sales economists expected, according to FactSet.
Sales fell 2.3% from January 2021, with the median home price jumping 15.4% from the same time last year to $350,300.
These prices are rising with so many potential buyers looking for a dwindling number of properties still on the market. The number of homes for sale at the end of January totaled just 860,000 – the fewest since the NAR began tracking it in 1999, and there are few signs that the pressure will ease soon.
The inventory of unsold homes was down 2.3% from December and 16.5% from a year ago. At the current rate of sales, that equates to a record 1.6 months supply, the NAR said.
While it’s normal for fewer homes to come up for sale in the months leading up to the annual spring home buying season, the extremely low level of properties on the market continues to give sellers a huge advantage over buyers.
The combination of rising home prices and a shortage of homes on the market has also given a head start to investors and buyers who can afford to outbid other potential buyers with cash. Some 27% of home sales last month were all-cash transactions, the NAR said. A year ago, they were only 19%.
Property investors accounted for 22% of deals in January, down from 15% a year ago. First-time buyers, meanwhile, accounted for 27% of all homes sold last month.
On average, homes sold 19 days after they went on the market last month. It’s not as fast as summer, when 17 days was the norm. In a more balanced market between buyers and sellers, homes generally remain on the market for 45 days.
Homebuilders have rallied to build more new homes in response to scorching housing demand. Nearly 1.6 million homes were started in 2021, a 15.6% increase from 2020, according to the Commerce Department. But many more houses need to be built. A recent analysis by Realtor.com found that the shortage of new homes relative to new households has swelled to nearly 6 million homes.
Demand in the housing market appears to remain healthy this year, supported by ongoing demographic shifts as young millennials and gen Zs come of age and seek homeownership. But with a housing shortage long before the pandemic, rising prices and rising interest rates will make it even harder for house hunters this spring to find a new home.
Average long-term mortgage rates in the United States rose this week, approaching levels not seen since 2019. The average rate on a 30-year loan rose to 3.92%, from 3.69% the previous week, according to mortgage buyer Freddie Mac.
The last time the 30-year rate was higher was in May 2019, when it hit 3.99%.
Historically low mortgage rates last year helped give future homeowners buying power as prices soared. Rates are now expected to rise as the Federal Reserve fights inflation by raising its short-term interest rate and ending its bond purchases that have helped keep interest rates down. low long-term interest.
The rapid sales now occurring could lose momentum simply because prices are rising so quickly and there are so few homes to choose from, said Nancy Vanden Houten, chief US economist at Oxford Economics.
“Resilient demand and solid income gains will support the housing market, but limited supply and declining affordability due to both higher prices and sharply higher mortgage rates will limit the pace of sales. “said Vanden Houten.