For January 2015, sales of US homes were the slowest seen in the past nine months. Compared to what analysts predicted, the year started off somewhat disappointing because of the low number of home closings.
As stated by Lawrence Yun, chief economist with the National Association of Realtors (NAR), sales were actually slower throughout the US, possibly due to seasonal influences. He explained that despite interest rates for mortgage loans staying near historic lows, whenever home inventory is low and prices continue to increase greater than the pace of inflation, sales will be slow.
Forbes also reported that while low rates are attracting potential home buyers, the problem is that there are not enough new and affordable homes to accommodate. As such, people are slower to make decisions and finalize purchases.
At the end of January, the total inventory of housing was only up 0.5 percent, meaning there were 1.87 existing homes for sale. Compared to the same time last year, 1.88 million homes were available. In December 2014, supply at the current sales pace was at 4.4 months but in January, inventory of unsold homes was at 4.7 months.
Yun said that while sales in January were slower than anticipated, year-over-year growth for prices remained solid. From one year ago, not only has the economy stabilized but actually improved. In addition, the labor market experienced noted improvement. Once rates begin to climb, the real test for the housing market will be the impact on affordability.
Freddie Mac reported a 3.67 percent decline in January for the average commitment rate specific to a 30-year, conventional FRM, the lowest since early 2013. That also represented a drop from 3.86 percent in December. For 2014, the average annual rate was at 4.17 percent.
There was also a 27 percent decline in January regarding the share of first-time homebuyers, a 1 percent drop from December. Of sales reported in January, 26 percent were first-time buyers.
Currently, the Federal Housing Administration (FHA) has an extremely restrictive approval process in place. As a result, condo buyers face significant limitations. For many people, the first step in becoming a viable homeowner is to purchase an affordable condo. Currently, the FHA is being pushed by the NAR to develop policies that would give people better access to condominiums but also financing that is affordable and flexible.
Other Changes in January
- All-cash sales accounted for 27 percent of January’s transactions, down 33 percent from the same time last year
- Individual investors purchased 17 percent of homes in January
- Of cash purchases, 67 percent were investors
- For January sales, short sales and foreclosures accounted for 11 percent, down from 15 percent last year
- Properties were on the market on average 69 days, three days longer than reported in December
- Short sales remained on the market on average 128 days versus foreclosures at 63 days
- Non-distressed properties tool 68 days to sell on average
- Sales of single family homes dropped to 5.1 percent to a seasonally adjusted rate annually of 4.27 million
- Median price for existing single family homes was $199,800