The winter real estate market in the US brings with it a drop in existing home sales. This past January, US home sales dropped to the lowest they have been since November 2015.
US Real Estate Market Trends: January 2019
The National Association of Realtors reported that existing home sales (which consist of completed transactions on single-family homes, townhomes, condos, and co-ops) fell 1.2% to an annual rate of 4.94 million units in January. This was below the forecasted rate of 5 million units. Compared to the same time last year, existing home sales were down 8.5%. It’s the third consecutive month in which the US housing market is experiencing a drop in home sales.
Existing home sales fell in most of the major regions of the US housing market, with only the Northeastern region enjoying an increase.
With this drop came a slowdown in the rise of house prices which, nonetheless, continued to climb modestly. The median existing house price in January rose to $247,500, an increase of 2.8% from this time last year. It’s the smallest increase in house prices since February of 2012.
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In terms of the US housing inventory, January saw 1.59 million previously-owned homes for sale on the market. Thanks to the drop in existing home sales, the national inventory was up from 1.53 million in December. The housing inventory was standing at 3.9 months which is up from 3.7 months compared to the previous month (A healthy real estate market would have 6 to 7 months of supply with balanced demand).
Why the Drop in Existing Home Sales?
Throughout 2018, the US housing market continued to experience rising mortgage rates along with sharply rising house prices, causing affordability issues across the nation for first-time homebuyers.
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However, just this past week, the 30-year fixed mortgage rate dropped to a 1-year low of 4.52%. With prices still rising modestly, existing home sales may climb back up in the coming months if mortgage rates continue to fall as we move through the year. Chief Economist at NAR, Lawrence Yun, is calling the drop in home sales a “cyclical low” and expects sales to rise back up as well:
“Existing-home sales in January were weak compared to historical norms; however, they are likely to have reached a cyclical low. Moderating home prices combined with gains in household income will boost housing affordability, bringing more buyers to the market in the coming months.”
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