The National Association of Realtors (NAR) announced Feb. 23 that January home sales hit their lowest monthly rate in nine months amid a weak national housing supply and elevated home prices.
Completed transactions for single-family homes, townhomes, condominiums and co-ops fell 4.9 percent from December to January for a seasonally adjusted annual rate of 4.82 million. This is the lowest rate since sales hit 4.75 million in April 2014.
Although sales are down, January’s number of total sales was still up year-over-year by 3.2 percent. Still, industry experts point to January’s data as a disappointing trend to start 2015.
“January housing data can be volatile because of seasonal influences, but low housing supply and the ongoing rise in home prices above the pace of inflation appeared to slow sales despite interest rates remaining near historic lows,” NAR Chief Economist Lawrence Yun said. “Realtors are reporting that low rates are attracting potential buyers, but the lack of new and affordable listings is leading some to delay decisions.”
The economy is growing stronger, which should help boost housing throughout the year. The question is how the market will react when historically low interest rates begin to escalate.
“Although sales cooled in January, home prices continued solid year-over-year growth,” Yun said. “The labor market and economy are markedly improved compared to a year ago, which supports stronger buyer demand. The big test for housing will be the impact on affordability once rates rise.”
All four regions analyzed by NAR experience diminished sales in January. The Northeast’s sales fell 6 percent in January to a rate of 630,000; the Midwest fell 2.7 percent to a rate of 1.08 million; the South fell 4.6 percent to a rate of 2.07 million; and the West fell 7.1 percent to a rate of 1.04 million.
Conversely, the median price for housing in all regions experienced increases year-over-year. The median price in the Northeast was $247,800, which is 2.7 percent above a year ago; the median price in the Midwest was $151,300, up 8.2 percent from a year ago; prices in the South hit $171,900 on average, up 7.4 percent year over year; and the West had a median sales price of $291,800, a 7.2 percent increase year-over-year.
First-time buyers largely have been recognized as being the demographic most affected by banks’ restricted lending policies, which is a factor in the sluggish rate of home sales at the start of the year.
NAR President Chris Polychron pointed to what he called the Federal Housing Administration’s (FHA’s) overly restrictive lending policies for first-time buyers looking to purchase condominiums as a stumbling block hindering the market from gaining momentum.
“Condominiums offer an affordable option and are the first step to homeownership for many homebuyers,” Polychron said. “NAR has urged the FHA to develop policies that will give buyers access to more flexible and affordable financing opportunities and a wider choice of approved condo developments.”