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Most of the housing market’s ills can be traced to one cause—there simply aren’t enough homes for sale to satisfy demand. It’s driving home prices and rents up, affordability down, and according to new data from the National Association of Realtors, sales way down.
Existing home sales dropped in January by 3.2 percent to a seasonally adjusted annual rate (SAAR) of 5.38 million compared to December. Compared to January of last year, it’s even worse—a 4.8 percent decline. That’s the largest annual decline since August of 2014.
And sales are lagging because housing inventory continues to shrink. While supply was up 4.1 percent compared to a month ago to 1.52 million existing homes for sale, it was down a whopping 9.5 percent from January of last year, the 32nd consecutive month of year-over-year inventory declines.
“A second month in a row of lackluster existing home sales is not an ideal way to begin 2018,” wrote Aaron Terrazas, an economist at Zillow. “Low inventory also continues to weigh on the market, and shows precious few signs of easing...There simply needs to be more inventory available to buy.”
The monthly decline in existing home sales was felt most in the single-family home markets in the West and Midwest. In the West, the SAAR of 1 million single-family home sales was a 5.7 percent drop compared to a month ago, while the Midwest’s SAAR of 1.17 million single-family sales was a 6.4 percent decline. The year-over-year decline in single-family sales in the West was 9.5 percent.
Existing home sales for January 2018
| Region | $100k or less | $100k to $250k | $250k to $500k | $500k to $750k | $750k to $1 mil | $1 mil or higher |
|---|---|---|---|---|---|---|
| Region | $100k or less | $100k to $250k | $250k to $500k | $500k to $750k | $750k to $1 mil | $1 mil or higher |
| Northeast | -7.6% | -2.3% | 1.2% | 12.2% | -4.4% | -16.0% |
| Midwest | -10.4% | 1.3% | 14.9% | 10.6% | 10.2% | 32.8% |
| South | -16.4% | 0.4% | 14.4% | 14.2% | 15.2% | 12.3% |
| West | -34.2% | -19.0% | -0.2% | 9.4% | 8.2% | 15.4% |
| Nationwide | -13.2% | -2.3% | 7.7% | 11.6% | 6.7% | 6.7% |
The low sales also continue to push home prices higher. The median price for homes in the U.S. in January was $240,500, 5.8 percent higher than the same time a year ago and the 71st straight month of year-over-year gains in home prices.
These trends have been going on for some time now and there just doesn’t seem to be much relief in sight. People aren’t selling their homes because competition for scoring another one would be intense, and they’d likely only make a lateral move at best.
Meanwhile, mortgage rates have been inching upward this year and will likely continue to do so. While rising rates didn’t have much impact on January’s existing home sales—which focus on closures on sales that were initiated months ago—it’ll make current homeowners reluctant to sell and buy a new one, particularly if their current mortgage isn’t paid off.
“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,” said Lawrence Yun, chief economist for the National Association of Realtors. “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.”