January 2021 Existing and Pending Home Sales

January 2021 Existing and Pending Home Sales

Mar 4, 2021
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The housing market in January continues to be strong, but there are some worrying signs developing. Extremely tight market conditions and a swiftly moving market mean that for buyers who are succeeding, the price appreciation on their home is quite strong. However, home price run-ups due to tight inventory and mortgage rates beginning to inch higher could spell affordability challenges particularly for first-time buyers.

Hello, this is Lawrence Yun, chief economist with the National Association of REALTORS®. The housing market in January continues to be strong, but there are some worrying signs that is developing.

So let's look first at the January sales figures, which is the second-highest monthly pace on a seasonally adjusted basis since 2006. The market continued to remain strong, with buyer activity rising better than 20% from January of 2020.

Regionally, we saw all four major regions with better than 20% growth, but if there is some concern, it's out in the west region where on a month-to-month basis it declined more than 3% related to the supply.

Simply not enough homes for sale – 1.9 months supply. These are extremely tight market conditions. The listed home is able to find a buyer signing of the contract within 20 days on average, so that is a very swift moving market, and the buyers are getting frustrated by lack of inventory.

Those buyers who are succeeding, the price appreciation is quite strong, 14% higher from January of one year ago.

So what are some worrying signs? The affordability challenges from strong price run-up for the first time buyers, but the second concern is that absolute low point on mortgage rate may be over what we saw as mortgage rate average, 2.7%, in December and January, but this will begin to inch higher. Mortgage rate may average 3% or maybe a little higher than 3%. Nothing to be concerned about, but the absolute low point in mortgage rate is likely to be over.

Overall for 2021, I am still optimistic, given the strength in the first quarter, and much higher anticipated sales activity in the second quarter of this year, given that there is a very low base to compare the second quarter of last year during the lockdown, even accounting for slightly lower sales in third and fourth quarter.

Lower sales this year compared to last year. Home sales will still be up 15% on an annual basis, so the outlook remains strong. Best to you in your business opportunity. Thank you.

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