Existing Home Sales Hit Decade High As Prices Jump More Than 7%

Tyler Durden's picture

So much for concerns that rising rates would slam the US real estate market.

According to the NAR, in January, Existing home sales jumped by 3.3%, well above the 1.1% consensus estimate, and more than reversing last month's revised -1.6% drop. The annuallized pace of sales rose to 5.69 million, above the 5.54 million estimate, and the biggest monthly jump since March 2016. January's sales pace was 3.8% higher than a year ago (5.48 million) and surpasses November 2016 (5.60 million) as the strongest since February 2007 (5.79 million).

Praising the rebound in housing transactions, NAR's chief economist Larry Yun said January's sales gain signals resilience among consumers even in a rising interest rate environment. "Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home," he said. "Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions."

And yet, there remains a glaring disconnect between the housing transactions, and mortgage applications, which as shown in the chart below, have tumbled in recent weeks far below prior years, as a result of rising rates.

The west led housing transaction, with only the midwest posting a 1.5% decline:

  • January existing-home sales in the Northeast jumped 5.3 percent to an annual rate of 800,000, and are now 6.7 percent above a year ago. The median price in the Northeast was $253,800, which is 2.5 percent above January 2016.
  • In the Midwest, existing-home sales decreased 1.5 percent to an annual rate of 1.29 million in January, and are 0.8 percent below a year ago. The median price in the Midwest was $174,900, up 6.5 percent from a year ago.
  • Existing-home sales in the South in January rose 3.6 percent to an annual rate of 2.31 million, and are now 3.1 percent above January 2016. The median price in the South was $201,400, up 9.2 percent from a year ago.
  • Existing-home sales in the West ascended 6.6 percent to an annual rate of 1.29 million in January, and are now 8.4 percent above a year ago. The median price in the West was $332,300, up 6.8 percent from January 2016.

The median existing-home price was $228,900, up 7.1% from January 2016 ($213,700). January's price increase was the fastest since last January (8.1%) and marks the 59th consecutive month of year-over-year gains.

Total housing inventory at the end of January rose 2.4 percent to 1.69 million existing homes available for sale, but was still 7.1% lower than a year ago (1.82 million) and has fallen year-over-year for 20 straight months. Unsold inventory is at a 3.6-month supply at the current sales pace (unchanged from December 2016). Properties typically stayed on the market for 50 days in January, down from 52 days in December and considerably more a year ago (64 days). Short sales were on the market the longest at a median of 108 days in January, while foreclosures sold in 51 days and non-distressed homes took 49 days. Thirty-eight percent of homes sold in January were on the market for less than a month.

Metro areas where listings stayed on the market the shortest amount of time in January were San Jose-Sunnyvale-Santa Clara, Calif., 43 days; San Francisco-Oakland-Hayward, Calif., 47 days; San Diego-Carlsbad, Calif., 55 days; Seattle-Tacoma-Bellevue, Wash., 57 days; and Nashville-Davidson-Murfreesboro-Franklin, Tenn., Vallejo-Fairfield, Calif., and Greeley, Colo., all at 58 days.

Looking at the composition of buyers, first-time buyers were 33% of sales in January, which is up from 32% both in December and a year ago. NAR's 2016 Profile of Home Buyers and Sellers revealed that the annual share of first-time buyers was 35% . According to Freddie Mac, the average commitment rate (link is external) for a 30-year, conventional, fixed-rate mortgage decreased slightly in January to 4.15 percent from 4.20 percent in December. The average commitment rate for all of 2016 was 3.65 percent.

Meanwhile, all cash sales continued to rise, and represented 23% of transactions in January, up from 21% in December but down from 26% a year ago. Individual investors, who account for many cash sales, purchased 15 percent of homes in January, unchanged from December and down from 17 percent a year ago. Fifty-nine percent of investors paid in cash in January.  

For now it remains unclear whether the recent spike in transactions will persist once consumer confidence fades away even as higher mortgage rates remain.  A further challenge to existing homes: the gradual disappearance of Chinese and other foreign buyers, which as discussed before, has had a substantial impact on ultra high end housing.

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NugginFuts's picture

so how does one interpret this "sales data" with the decline in mortgage applications? Either one of them is right and the other wrong, or there are a helluva lot more cash buyers in this market than I thought. 

kahplunk's picture

still some cash buyers out there at least here in Cali.

cashtoash's picture

people paying cash for the home??? all the rich people, brokerages, investors??

NugginFuts's picture

how dumb are these rich people exactly? You don't lay down 100% cash at the top of a bubble while other buyers are being priced out of the market due to rising interest rates. 

I'd say this number comes down next month. Hard.

SeanJackP1's picture

You do if you stole money from the Chinese people and see buying into a bubble as just a transaction cost for laundering your cash.

itstippy's picture

The "mortgage applications" number includes refi's of existing mortgages.  Those are way down due to rising rates.

NugginFuts's picture

Refis are down 1% w/w, but purchases are down 3%. So again, we got enough cash buyers in the market to make up the difference? Or is the decline in sales lagged a month or two to reflect the drop in mortgage apps?

http://www.housingwire.com/articles/39283-mba-mortgage-applications-cont...

froze25's picture

Looks like about a 2 month lag since listing to sale date is about 58 days.

3LockBox's picture

I read that no down purchase loans are back. If so they must be giving out loans like candy. Any wonder prices are up? How long do you think that will last? Defaults are sure to follow.

corporatewhore's picture

who is offering nothing down other than USDA or VA?  Curious minds want to know

Rellorellin's picture

I just unloaded my home in Chicago. The buyer had an FHA loan with 3% down. I gladly paid their closing costs, so this home would sell fast. They also were approved for buyer assistance through this program  http://www.athomeillinois.gov/. Essentially, they put NOTHING down. From what I heard, there are programs like this throughout the country.

corporatewhore's picture

God Bless America!!!   

LOL.  You are right.  You can get a "community" or other organization nonsense grant to buy a home if you qualify.  Unreal

 

chomu's picture

A good chunck of those mortgage apps in the fall were for refis and not purchses

One World Mafia's picture

"So much for concerns that rising rates would slam the US real estate market."

 

IT"S INFLATION.  Rising rates are lagging the REAL rate of inflation (as opposed to the gov's jiggered figures).

SomethingSomethingDarkSide's picture

$2,000 a month for 30 years on a nice condo, maybe a large run down 2 bedroom?  Who wouldn't take out financially crippling and precariously funded loans out?!

 

all-priced-in's picture

People that have been on the fence rushing to buy before rates go up?

dlfield's picture

Well, and sales (closings) trail applications by 1-2 months, so time will tell.

kahplunk's picture

I wouldn't go out and start doing flips that's for dam sure.

 

Made that mistake back in 06 had 5 houses when the bitch popped lost my shirt and shorts.

 

Now I am renting an 800k house from some green horn kid funny shit I want to tell him whats up but, I know he wont listen because I was the same dam way.

CheapBastard's picture

There's lots of houses for sale where I live still. Three years ago a person had to wait 6 months to get into one and then the energy sector got smashed by Soweeto and now many cannot afford those $750,000 houses esp with rising prop tax rates and house insurance. Throw in a couple of demanding kids who want the latest e-gadget and Daddy has a problem.

Hohum's picture

Buy a house before rates go up even further.  And then there's the relatively tame winter.

Francis Marx's picture

Tyler doesn't realize that people flurry buy if they know rates are only going higher. Things will readjust lower once that rate goes up to higher levels.

corporatewhore's picture

the home that I owned in 2010 just sold for twice what it sold for.  5 days.  this market is insane.  i opt out of chasing this craziness.

moorewasthebestbond's picture

How the fuck can this be true with the nosedive in mortgage originations?

 

Answer: Much of these "existing home sales" are really just investment properties sloshing back and forth between speculators. Not real sales, just churn. It damn sure isn't first time home buyers driving this increase.

buzzsaw99's picture

they count refis in mortgage originations and those go into the shitter when rates aren't going down.

innertrader's picture

THE STOCK MARKET is creating profits, that I would imagine, are being taken may be moving that cash into housing.  At least a small portion.  Does anyone have a source of data concerning this possibility?  It would certainly makes sense with the CASH purchases vs. financed.  I know one thing, no matter what, I don't want to be caught flat footed, i.e. not invested somewhere.

CHoward's picture

That explains why retail sales were down so far - everyone was out buying themselves a home.  Cool. 

Break_the_Bank's picture

Although historically I've been an optimist, I don't hold much optimism for the near future of the housing market. Harry Dent makes a good case for the poor demographics of US consumers. There will come a turning point when aging baby boomer sellers will far outnumber buyers, and those buying now won't have anyone to sell to 10 years from now. Of course rising rents may provide imputes for those looking for stable "rent." But then rising taxes may be the problem in some areas, like Chicago.  

 

edifice's picture

Subdivision of single-family homes into MDUs is already happening. I live in one, albeit in a very nice neighborhood. Renters, like myself, don't want to pay $1,300/mo. for a 550 sq. ft. apartment. I also don't want to 'own' a house, so this is what I do. The house I live in is very nice, recently updated. I have garage space, access to storage (basement), access to a full kitchen, and a private bathroom, for $800/mo.

This allows me to plow almost 50% of my net income into retirement funds. Many people out there are like me. 

William Dorritt's picture

My burb in Chi-land is minus 10,000 high paying jobs, and has turned into a bedroom community with tax bills 100% higher than 15 years ago.

 

Shrinking economy with run away Govt Cost increases.......

 

The McMansions continent to go up at an astounding rate as does the number of Progressives at our City Council Meeting that want to make us just like Chicago which they just fled.

World-Gone-Mad's picture

I may be wrong, but I think the reason sales are up and mortgages are down is due to the volume of cash sales to Real Estate REITS. In my opinion, the real estate market is a ticking time bomb, and we'll soon experience another 2008-2011 debacle.

And oh by the way, the info is according to NAR which I don't trust at all. All the financial numbers are rigged and real estate is no exception. YUGE lobbying and massive contributors to the cronies in congress.

edifice's picture

All you have to do is look at real wages vs real housing prices. It went from like 1.5x - 2x yearly income in 1986, to 5x - 6x, today. Unsustainable. Prices have to move lower and drastically so, for there to be a real, functioning market.

gatorengineer's picture

Zillow for what thats worth says my house dropped 2.5% in value between Dec and January..... which was basically its entire gain in 2016...

Crack its whats for dinner.

Pigeon's picture

1/3 of sales were to first-time buyers at the top of the bubble. What could go wrong?

FreeShitter's picture

Not a damn thing.....interested in a 75K F250?

PoasterToaster's picture

The accepted theory about interest rates is exactly opposed to reality.  Keynesians and their silly Phillips Curve.

One World Mafia's picture

Nominal rates are below the real rate of inflation.  

leefool's picture

Here is some background on apartments sales in MA (i know not houses, but it is relevant). Tried buying one for under 150K as an investor with a plan to rent it out. I am cash only buyer. First two properties - i was outbid by other cash only buyers. Third property i was the one outbidding others (offered couple of thousands more than the ask knowing there are "at ask" cash only buyers). Monthly income will be over $750 which is over 6.5% dividend. Not intend to sell. Ever. i will get my full investment back in 14 years. Then my children get it. Now tell me a better way to plug my cash and get a return on it and i will do it.

 

Iconoclast's picture

Of course you'll never have voids, never have a problem tenant, never have repairs or renewals, there'll always be queues around the block to rent and house prices will only ever go up. Fill your boots.

leefool's picture

i know i will have to remodel from time to time and will have voids from time to time. Lets take kind of extreme case of only 50% occupancy where every other year i have no tenants. i still get over 3% pay on my funds.There was no line around the block, but i placed my rent about $100 lower than the market and got filled within a week. Good tenant/credit.

Yes, house prices will be higher for the next generation. My own house that i bought in 1998 for 190K is now estimated at over 400K. Of course they will fluctuate but over my lifetime (25-30 years from now) they will end up higher, much higher. Please do not bring me examples of AR/CA/FL bubbles where houses dropped 50%. In MA they barely moved during the downturn.

Also, important aspect is that i am not leveraging (taking a mortgage, paying interest), it is my cash that otherwise would be just laying around loosing 3% per year. So again, if you have a better/safer investment - i am listening.

Stupid that i had the cash for over 10 years and did nothing with it. Had i acted then i would have by now fully recovered my investment and would have apartment that costed me nothing but keeps paying me.

Houses Depreciate's picture

Yet you couldn't find a buyer for half of what you got in. good luck you're going to need it.

Houses Depreciate's picture

The you're gonna lose your ass. Rentals are falling at a pretty good clip now.

Muppet's picture

Again Z/H?   The NAR has proven itself the absolute worst reporting source.   Why reblog them?

Houses Depreciate's picture

Remember when NAR over reported sales for 4 years straight?  Seems like somebody's got a problem with their calculation. Because housing demand is at 20 year lows and falling. See for yourself.

 

http://1.bp.blogspot.com/-0q8fIAsczFk/VUANHEhSbnI/AAAAAAAAjRs/oANwXOUviG...