An uptick in supply and lower prices failed to boost existing home sales in January, which unexpectedly fell 3.2 percent versus the marginally downward revised December level to an annualized rate of 5.380 million, well below the consensus estimate of 5.650 million and the lowest rate for January since 1999. Year-on-year, home resales were down 4.8 percent, the largest decline since August 2014.
Though lack of supply continued to hamper sales volumes, supply in January's market increased 4.1 percent from December's level to 1.520 million homes. While this is down 9.5 percent from January last year, inventory rose from December's 3.2 months, a 19-year low, to 3.4 months. Still, lack of choice remains a serious problem for the resale market.
But prices softened considerably in January, which won't be drawing new homes onto the market. The median selling price fell by a sharp 2.4 percent to $240,500 for a year-on-year increase of 5.8 percent.
Sales were down compared to December in all four regions of the country, with declines most pronounced in the Midwest, down 6.0 percent, and the West, down 5.0 percent.
While existing home sales tend to be volatile, the softness in today's report may cast some doubt on housing strength indicated by last week's report of a surge in permits to the best level of the expansion.
Inventory Still a Big Issue
The National Association of Realtors® (NAR) said existing homes sold during the month at a seasonally adjusted rate of 5.38 million, representing a year-over-year decline of 4.8 percent. It was the slowest sales pace since last September and the largest annual loss since a 5.5 percent decline in August 2014. December sales were revised down from 5.570 million to 5.56 million. The months sales results were broad-based. All four U.S. regions saw both monthly and annual declines.
Lawrence Yun, NAR chief economist, says January's retreat in closings highlights the housing market's glaring inventory shortage at the start of 2018. "The utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the U.S. last month," he said. "While the good news is that Realtors in most areas are saying buyer traffic is even stronger than the beginning of last year, sales failed to follow course and far lagged last January's pace. It's very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth."
The median existing-home price for all housing types in January was $240,500, up 5.8 percent from the January 2017 median of $227,300. It was the 71st consecutive annual gain. The median existing single-family home price rose 5.7 percent to $241,700 and condo prices were up 7.1 percent to a median of $231,600.
Total inventories did grow during the month, increasing by 4.1 percent to 1.52 million existing homes available for sale. That number is still 9.5 percent lower than a year ago, marking the 32nd straight month the inventory has shrunk on an annual basis. Unsold inventory is estimated at a 3.4-month supply at the current rate of sales. "Another month of solid price gains underlines this ongoing trend of strong demand and weak supply.
Nonsense from NAR Chief Economist Lawrence Yun
There is not "strong demand" as Yun states. However, there is demand to buy at prices that do not exist. This guy cannot put two and two together and come up with the correct answer even though he goes on to say "participation of first-time buyers continues to lag. Twenty-nine percent of sales in January were to that cohort, down from 32 percent in December 2017 and 33 percent a year ago."
Here's more of Yun's nonsensical analysis: "If inventory conditions can improve enough to cool the swift price growth in several markets, most prospective buyers should be able to absorb the higher borrowing costs."
What a joke. If buyers cannot afford prices now, cooling price growth won't help. Buyers will need to see a price crash and then existing home owners have to be willing to sell.
Finally, real wages have to rise. Instead, the average person makes what he did a year ago and the median worker is undoubtedly much worse off.
Nonsense from NAR President Elizabeth Mendenhall
NAR President Elizabeth Mendenhall, says Realtors® in several markets are reporting that the spring buying season appears to be starting early this year. "Those planning to buy a home this spring should look into getting pre-approved for a mortgage now and start having those serious conversations with their real estate agent on what they're looking for in a home and where they want to buy," she said. "With demand exceeding supply in most areas, competition will only heat up in the months ahead. Beginning the home search now could lead to a successful and less stressful buying experience."
Beat The Rush! What Rush?
The early start to Spring buying led to a 4.8% year-over-year decline. Mendenhall offered more nonsense about supply including a "beat the rush" message that comes across more as desperation than anything else.
There will not be a rush. People, especially first-time buyers and those clobbered by the Fed's inflation policies, cannot afford the asking prices. The median home price is up 5.8% from a year ago. The median real wage is lower.
Wage and Growth Analysis
- Wage Growth: Despite the hype, Acceleration in Wage Growth is a Statistical Mirage
- Real Wages Up One Cent: Congratulations Workers! You Make One Penny More Than a Year Ago
- Median Wages Decline 7 times in 11 Years: How the Fed's Inflation Policies Crucify Workers in Pictures
Anyone who doesn't understand how demand can allegedly be high but sales soft needs to read those articles.
Mike "Mish" Shedlock