Fueled by low mortgage interest rates and strong demand, existing home sales, as reported by the National Association of Realtors (NAR), increased to three-month high in January. But surging house prices and inventory shortages could limit demand and slow the market.
Total existing home sales, including single-family homes, townhomes, condominiums and co-ops, rose 0.6% to a seasonally adjusted annual rate of 6.69 million in January, the second highest level since April 2006. On a year-over-year basis, sales were 23.7% higher than a year ago.
The first-time buyer share increased to 33% in January, up from 31% in December and 32% a year ago. However, price gains threaten this submarket in the future. The January inventory level fell to record-low 1.04 million units from 1.06 million units in December and is down from 1.40 million units a year ago.
At the current sales rate, the January unsold inventory remained at an all-time low 1.9-month supply but down from 3.1-month a year ago. This low level supply of resale homes is good news for home construction.
Homes stayed on the market for an average of just 21 days in January, an all-time low, seasonally even with last month and down from 43 days a year ago. In January, 71% of homes sold were on the market for less than a month.
The January all-cash sales share was 19% of transactions, unchanged from last month but down from 21% a year ago.
Tight supply continues to push up home prices. The January median sales price of all existing homes was $303,900, up 14.1% from a year ago, representing the 107th consecutive month of year-over-year increases. The median existing condominium/co-op price of $269,600 in January was up 8.6% from a year ago.
Regionally, two regions saw an increase in existing home sales in January. Sales in the Midwest and South rose 1.9% and 3.2% from last month, while sales in the Northeast and West fell 2.2% and 4.4%. On a year-over-year basis, sales still grew by double-digits in all four regions, ranging from 21.3% in the West to 25.1% in the South.
Though existing home sales continue to outperform and housing demand is expected to remain strong due to low mortgage rates and remote-work flexibilities, rising lumber prices and shortage of labor and land make housing supply struggle to meet the increased level of demand. The imbalance between housing supply and demand could hamper future sales by driving up house prices and eroding affordability.