January brought plenty of good news regarding the national housing market as both pending and existing home sales improved month over month, according to the National Association of Realtors®.
However, the lack of inventory – including in the Boulder-area and Colorado markets – is hindering the West from experiencing the healthy improvement in sales that other regions are: existing home sales rose in every region but the West, according to the NAR.
The NAR reports that a seller's market is developing and home prices continue to rise steadily above year-ago levels.
Total existing home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – increased 0.4 percent to a seasonally adjusted annual rate of 4.92 million in January from a downwardly revised 4.90 million in December, and are 9.1 percent above the 4.51 million-unit pace in January 2012, according to the NAR.
Lawrence Yun, NAR chief economist, says tight inventory is a major factor in the market.
“Buyer traffic is continuing to pick up, while seller traffic is holding steady,” he says. “In fact, buyer traffic is 40 percent above a year ago, so there is plenty of demand but insufficient inventory to improve sales more strongly. We've transitioned into a seller's market in much of the country.”
Total housing inventory at the end of January fell 4.9 percent to 1.74 million existing homes available for sale, which represents a 4.2-month supply2 at the current sales pace, down from 4.5 months in December, and is the lowest housing supply since April 2005 when it was also 4.2 months, according to the NAR.
Listed inventory is 25.3 percent below a year ago when there was a 6.2-month supply. Raw unsold inventory is at the lowest level since December 1999 when there were 1.71 million homes on the market.
“We expect a seasonal rise of inventory this spring, but it may be insufficient to avoid more frequent incidences of multiple bidding and faster-than-normal price growth,” Yun explains.
The association also reports that pending home sales rose in January, making it the 21st consecutive month in which that statistic rose above the level it was a year ago. Despite a limited inventory, even the West’s pending home sales improved only slightly, though other regions experience healthy monthly gains.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 4.5 percent to 105.9 in January from a downwardly revised 101.3 in December; the January statistic is 9.5 percent above January 2012, when it was 96.7, according to the NRA. The data reflect contracts but not closings.
The January index is the highest reading since April 2010, when it hit 110.9 just before the deadline for the home buyer tax credit. Aside from spikes induced by the tax credits, the last time reading was higher was in February 2007 when it reached 107.9.
Lawrence Yun, NAR chief economist, believes inventory is the key to this year's housing market.
“Favorable affordability conditions and job growth have unleashed a pent-up demand,” he says. “Most areas are drawing down housing inventory, which has shifted the supply/demand balance to sellers in much of the country. It's also why we're experiencing the strongest price growth in more than seven years.
“Over the near term, rising contract activity means higher home sales, but total sales for the year are expected to rise less than in 2012, while home prices are projected to rise more strongly because of inventory shortages,” Yun adds.
The PHSI in the Northeast rose 8.2 percent to 84.8 in January and is 10.5 percent higher than January 2012. In the Midwest the index increased 4.5 percent to 105.0 in January and is 17.7 percent above a year ago. Pending home sales in the South rose 5.9 percent to an index of 119.3 in January and are 11.3 percent higher January 2012. In the West the index edged up 0.1 percent in January to 102.1 but is 1.5 percent below a year ago.
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