• Moderating mortgage rates and high consumer confidence in January boosted existing homes sales to the highest figures in nearly a decade; they were up 3.3% since last month, and up 4.0% year-over-year, when controlling for seasonality.
• Inventory remains the cautionary counterpoint to otherwise positive existing home sales numbers, increasing only 2.4% over near record lows in December.
• Persistently tight inventory and expected increases in mortgage rates will likely temper existing home sales and continue to squeeze first-time homebuyers as we enter spring home-buying season.
January’s existing home sales brought a strong start to 2017, lifting the seasonally adjusted annualized rate to 5.69 million units, the highest in nearly 10 years. Strong consumer confidence and softening mortgage rates buoyed home sales to a 3.3% increase over last month. With 2016 ending in the best year for existing home sales in a decade, the current rate, scaled by population, is at 87.3% of pre-recession levels.
Low inventory remains the cautionary counterpoint to otherwise positive existing home sales numbers. January saw inventory of existing homes increase to 1.69 million units, a slight increase over December. Should mortgage rates creep up as anticipated, stronger headwinds are in store for homebuyers already facing thin existing supply.
Heading into this year’s spring home-buying season, the affordability and inventory challenges for first-time buyers are especially acute. Trulia’s Market Mismatch report found a shortfall of starter and trade-up homes when compared to search interest on Trulia for those homes. The premium home segment, however, had greater supply than demand with only 11 of the 100 largest cities having less inventory than search activity in the last quarter of 2016.
