Sales of existing homes inched higher in January, rising to a seasonally adjusted annual rate of 4.92 million properties. That was up from the downwardly revised 4.90 million homes sold on an annualized basis in December. (Previously, the December sales total had been estimated at 4.94 million units.) As with nearly all of the housing figures issued in recent months, the data were significantly better than the year-earlier figures. In this case, 4.51 million homes had been sold in January of 2012. Note that this report was compiled by the National Association of Realtors (NAR), a trade group.
According to Lawrence Yun, the NAR's chief economist, tight inventories of unsold homes are a major factor in the housing market at present. According to Mr. Yun, “buyer traffic is continuing to pick up, while seller traffic is holding steady.” In fact, buyer traffic is up an imposing 40% from a year ago. That would normally translate into an even stronger sales pace. It is just that the inventory is not there.
In such an environment, it would follow that prices would be on the rise, and that is just what is going on now. For example, the national median price of an existing home sold was $173,600 in January, up 12.3% in the past year. In fact, the January gain represented the eleventh month in a row that prices were up on a year-to-year basis, although prices were down somewhat from December, which may just have been caused by a change in the sales mix.
Meanwhile, distressed homes, including foreclosures and short sales, accounted for 23% of aggregate sales last month. That was down from 24% in December, and was well under the 35% total in place a year ago. That is also bullish, as foreclosures have been a drag on the market and a major depressant on the pricing side. Thus, on an apples-to-apples basis, prices are even stronger than the raw numbers imply, as low-priced foreclosures and short sales are on the decline nationally.
As to inventories, they fell by another 4.9% last month, and at the end of January represented just a 4.2-month supply. At the trough of the housing cycle a couple of years ago, inventories had been approaching a full year. In January of 2012, the inventories had been at a 6.2-month level. Most housing experts figure that a six-month supply--or less--is healthy. Given all this, the long period in which this has been a buyers market is fast coming to an end, and we are seeing some signs that a sellers market is beginning to take hold--if not nationally, then at least in some local and regional markets.
Regionally, existing home sales rose in the Northeast, the Midwest, and the South last month, but fell in the West. Taken together, this was a reassuring report, and suggests that the housing market is alive and well and likely to press forward in 2013. At the time of this article's writing, the author did not have positions in any of the companies mentioned.