Existing Home Sales Plunge 3.2%: Worst January Since 1999

Economists expected last year's strength to continue. It petered out in December and the floor fell out in January.

The Econoday consensus for existing home sales was 5.65 million units. Instead, sales took a dive to 5.35 million units. This was the second consecutive monthly decline.

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

Anyone who doesn't understand how demand can allegedly be high but sales soft needs to read those articles.

Mike "Mish" Shedlock

No. 1-21

It is pretty simple really: 1) Houseing prices (what people expect to sell their house for) have skyrocketed. 2) Wages and Jobs have not. 3) Permits, Zoning and associated type Rules have also skyrocted (and become stupid). 4) Young people see no reason to join in on the insanitiy of it all.


It is pretty simple really: - Houseing prices (what people expect to sell their house for) have skyrockets


Come to Pacific Heights in San Francisco. Look at the prices per quality per square foot, and tell me a developer cannot add additional higher quality square footage for less than that…. Ditto for a band going 50 miles inland, along virtually the entirety of both coasts. And many, many other areas of the US.

The reason free markets work, is that any supplier capable of supplying a good for a lower cost than what he estimates he can sell it for, builds it. Hence adding to supply. Hence lowering prices. Until there is no longer anyone left capable of building an additional unit, for less than the going price. Then someone improves technology/efficiency a bit, and can build a little cheaper again. Continuing to add to supply. That’s why cellphones get cheaper and more plentiful over time. Instead of “cellphonelessness,” and having to sit in traffic for two hours each way to make a phone call, being an increasing problem.

That’s about as basic econ 101 as it is possible to get. Conversely, not comprehending even that, is about as economically illiterate as it is possible to get.

Absent bans on doing so, I personally know many in Pacific Heights who would love to hire some Mexicans (Or Irishmen. Or plain Americans) to add another 1000 square foot apartment/In-law unit to their house, and either rent it, or sell it for $3million. It’s what’s called a steal. A laydown. Free money. What have you. And I know many more who would love nothing more than knocking down their entire $15mill ramshackle, and instead turn it into 20 condos, sell 19 of them for $5mill a piece, and living in the modern-amenitied, brand new penthouse themselves. Looking down on Nancy Pelosi, as is fair and proper. The same is true in Every.Single.Decent.Neighborhood.In.America. Without a single exception. Yet virtually none of them have the freedom to do so, in the process alleviating the “housing problem.” So how is “government allowing too much development, again?”

If people were free; rather than under the jackboot of a totalitarian state doing it’s darndest to keep people desperate, indentured and homeless; all those square feet, in every neighborhood, that there is demand for at above cost of adding them, would be built. Massively adding to housing supply. And, and this is important, so pay attention: Adding to Supply In The Places People Want To Live! Government “allowing” construction of a few overpriced, bottom of the barrel shoeboxes, under a freeway, in a ghetto, a 2-hour commute from where people work, has no more to do with a free market, than a government banning cellphones claiming to make up for it by “allowing” construction of shoddily built, outdated telegraphs.

As for “infrastructure not keeping pace”; if there is demand for more infrastructure, more will be built. Again, as long as people are free to do so. It’s that pesky econ 101 again: Free people add to supply until prices are lower than what they can do it for. Because, as long s they can do it for a lower cost than the prevailing price, they can make a quick buck by doing so. Assuming they are not barred by a bunch jackboots with guns, cheered on by an army of accidentally privileged, self-righteous, economically illiterate, incompetent, leeching and freeriding drones incapable of contributing anything more productive than sitting around cheering for a totalitarian thug army to rob and harass others on their behalf, of course.


You always post this nonsense about housing prices being inflated because the government doesn't allow building. I'm assuming you must live outside the US, because you can look at a map of any major city in the US and see everything is built upon. The government has an incentive to improve on as much land as possible because improved land fetches a lot more in property tax. if there's an issue with the government, it's the opposite of what you write. They allow too much development. Infrastructure improvements can't keep pace.


My frustration with America's housing policy boiled over when I read a piece about how roughly 80% of new apartment construction was for the high-end luxury market. The government holds huge responsibility for a rising share of our housing problems in low-income situations because its policies avoid dealing with the growing number of tenants that are irresponsible.

Government housing cherry-picks the best of the low-income renters providing them with very low rents and nice apartments and dumps the rest on the private sector. The following piece argues the best way to address or level the playing field would be to move away from public housing and give those needing housing aid "rent only vouchers" that could be used with any landlord rather than putting these people into a quasi-government ran project.