Early 2023 Sees Modest Rise in Home Sales Despite Mortgage Rate Challenges

📝 SUMMARY: The real estate market kicked off the year with a modest uplift in previously owned home sales, marking a 3% rise in January. This improvement was largely attributed to the reduced mortgage interest rates observed in the last two months of the previous year, according to data from the National Association of Realtors (NAR). The seasonally adjusted annualized rate of sales reached 4 million units, a 3.1% increase from the previous month, though there was a slight 1.7% dip compared to the year before.

The backdrop to these transactions were the closing contracts likely signed during November and December, a period when mortgage interest rates had receded from their October peak of 8% to about 6.6% by mid-December. Despite this favorable condition aiding January's sales, the market is once again feeling the pressure from a rebound in rates, now surpassing the 7% mark.

January's inventory of homes for sale saw a slight uptick to 1.01 million units, a 3.1% rise from January 2023, yet still resulting in a scarce three-month supply indicative of a seller's market. The median price across all housing types soared to $379,100, setting a new record for January and reflecting a 5.1% year-over-year increase. This pricing dynamic was consistent across all four U.S. regions, with a notable 16% of homes selling above the asking price, highlighting the competitive market landscape.

The prevalence of cash transactions, constituting 32% of all deals, underscored the strong demand and competitive nature of the market, marking the highest all-cash share since June 2014. First-time buyers, representing only 28% of purchases, are particularly impacted by the scarcity of affordable listings. Despite the temporary relief provided by lower mortgage rates, the resurgence of higher rates is casting a shadow over the market's outlook, with new listings increasing but signed contracts on a decline.

🔍 SOURCE: https://www.cnbc.com/2024/02/22/existing-home-sales-rose-3percent-in-january-2024.html