Us home sales hit a six-month high, despite rising prices

Photo credit: Michael Patrick

US home sales have reached a six-month high at the start of 2016.

Transactions jumped 11 per cent year-on-year, according to the National Association of Realtors, the largest year-over-year gain since July 2013, with sales only dipping in the West.

Total existing-home sales edged 0.4 per cent higher to a seasonally adjusted annual rate of 5.47 million in January, from a downwardly revised 5.45 million in December.

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," he comments. "Despite the global economic slowdown, the housing sector continues to recover and will likely help the US economy avoid a recession."

The share of first-time buyers remained at 32 per cent in January for the second consecutive month and is up from 28 per cent a year ago. First-time buyers in all of 2015 represented an average of 30 per cent, up from 29 per cent in both 2014 and 2013.

Conditions may not remain this positive for long, though. The National Association of Realtors' index of pending home sales - a forward-looking indicator of market activity - declined 2.5 per cent in January 2016. Although the pending sales index has increased year-over-year for 17 consecutive months, January's annual gain of 1.4 per cent was the second smallest during that timeframe.

The dip in contract signings is attributed to price growth, which continues unabated and increasingly hinders those looking to purchase homes.

Total housing inventory at the end of January increased 3.4 per cent to 1.82 million existing homes available for sale, but still remains 2.2 per cent lower than a year ago (1.86 million). The spring buying season, meanwhile, is just around the corner.

"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." 

The median existing-home price for all housing types in January was $213,800, up 8.2 per cent from January 2015 ($197,600). Last month's price increase was the largest since April 2015 and marks the 47th consecutive month of year-over-year gains.