NAR Warns Of Overheating Home Prices As Existing Home Sales See Biggest Annual Jump Since 2013

While it may not be quite the Vancouver-type feeding frenzy for Chinese money launderers, the US existing home sales market (at least until its inevitable downward revision courtesy of the permabullish NAR) continued to chug higher in January, when the number of existing homes sold rose to a 5.47MM annual rate, up 0.4% from the 5.45MM in December, and the strongest pace since the 5.48MM sold last July, beating expectations of a -2.5% drop; in fact the print was higher than the top estimate in the range. This follows the torrid December surge when existing homes sales soared 12.1%.

On a year over year basis, sales rose 11.0% – the largest year-over-year gain since July 2013 (16.3 percent).

Suggesting that the majority of buyers are anyone but ordinary middle class Americans was the the jump in the median existing-home price which in January was $213,800, up 8.2% from January 2015 when it was $197,600. Last month's price increase was the largest since April 2015 (8.5%) and marks the 47th consecutive month of year-over-year gains. With the pace of appreciation rising at more than 4 times the average US wage growth, one wonders at what point will ordinary Americans be able to afford housing in their native country.

NAR's Larry Yun was as always on hand to provide his cheerful spin:

"Lawrence Yun, NAR chief economist, says existing sales kicked off 2016 on solid footing, rising slightly to the strongest pace since July 2015 (5.48 million). "The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints," he said. "Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession."

That remains to be seen, however, especially since it is a function of how porous Chinese capital controls remain considering that a large number of existing home sales, especially on the high end is driven by Chinese buyers seeking to park hot money in US real estate.

Total housing inventory at the end of January increased 3.4% to 1.82 million existing homes available for sale, but is still 2.2% lower than a year ago (1.86 million). Unsold inventory is at a 4.0-month supply at the current sales pace, up slightly from 3.9 months in December 2015.

Curiously, even Yun is starting to get worried about the bubbly nature of the existing housing market:

"The spring buying season is right around the corner and current supply levels aren't even close to what's needed to accommodate the subsequent growth in housing demand," says Yun. "Home prices ascending near or above double-digit appreciation aren't healthy – especially considering the fact that household income and wages are barely rising." 

Some more statistics:

  • The share of first-time buyers remained at 32 percent in January for the second consecutive month and is up from 28 percent a year ago.
  • First-time buyers in all of 2015 represented an average of 30 percent, up from 29 percent in both 2014 and 2013.
  • All-cash sales were 26 percent of transactions in January (24 percent in December 2015) and are down from 27 percent a year ago.
  • Individual investors, who account for many cash sales, purchased 17 percent of homes in January (15 percent in December 2015), matching the highest share since last January. Sixty-seven percent of investors paid cash in January.
  • Properties typically stayed on the market for 64 days in January, an increase from 58 days in December but below the 69 days in January 2015.
  • Short sales were on the market the longest at a median of 77 days in January, while foreclosures sold in 57 days and non-distressed homes took 61 days.
  • Thirty-two percent of homes sold in January were on the market for less than a month.
  • Distressed sales – foreclosures and short sales – rose slightly to 9 percent in January, up from 8 percent in December but down from 11 percent a year ago.
  • Seven percent of January sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 13 percent below market value in January (16 percent in December), while short sales were discounted 12 percent (15 percent in December).
  • Single-family home sales increased 1.0 percent to a seasonally adjusted annual rate of 4.86 million in January from 4.81 million in December, and are now 11.2 percent higher than the 4.37 million pace a year ago. The median existing single-family home price was $215,000 in January, up 8.3 percent from January 2015.

The regional breakdown:

  • January existing-home sales in the Northeast increased 2.7 percent to an annual rate of 760,000, and are now 20.6 percent above a year ago. The median price in the Northeast was $247,500, which is 0.9 percent above January 2015.
  • In the Midwest, existing-home sales rose 4.0 percent to an annual rate of 1.30 million in January, and are now 18.2 percent above January 2015. The median price in the Midwest was $164,300, up 8.7 percent from a year ago.
  • Existing-home sales in the South were at an annual rate of 2.24 million in January (unchanged from December) and are 5.7 percent above January 2015. The median price in the South was $184,800, up 8.5 percent from a year ago.
  • Existing-home sales in the West decreased 4.1 percent to an annual rate of 1.17 million in January, but are still 8.3 percent higher than a year ago. The median price in the West was $309,400, which is 7.4 percent above January 2015.