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Buyer Demand Continues to Drive Up Home Prices
Dated: April 5 2021
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For the 107th month in a row, national home prices climbed year over year, according to the National Association of Realtors (NAR). Every sales region in the country posted price increases, with the median existing-home price rising 14.1% from a year earlier. The rising sales prices, however, did little to deter buyers, as every sales region posted year-over-year double-digit increases in existing-home sales. When comparing month-over-month sales activity, rates varied from region to region. The demand for homes is reflected in the rate at which homes are remaining on the market. In January, the average home sold in just 21 days, unchanged from December but down significantly from the 43 days a home remained available just a year ago. Of all the homes sold in January 2021, 71% were sold in under one month.
Buyers Compete for Scarce Listings
The high demand for homes is reflected in the ongoing housing shortage. At the end of January, there were just 1.04 million homes available for sale, down 25.7% year over year. NAR has never recorded a decline in inventory so severe. At the current sales pace, the stock of houses would supply the market for only 1.9 months, unchanged from December but down from the 3.1-month supply recorded a year ago. According to Lawrence Yun, chief economist for NAR, "Home sales continued to ascend in the first month of the year, as buyers quickly snatched up virtually every new listing coming on the market." He adds that sales could have been as much as 20% higher if there was more inventory on the market and buyers had more choices.
Housing Remains a Bright Spot in U.S. Economy
Unlike other parts of the U.S. economy, the housing market seems to be immune to the effects of COVID-19. In every tracked metro area, home prices increased during 2020's fourth quarter. "Home sales are continuing to play a part in propping up the economy," said Yun. "With additional stimulus likely to pass and several vaccines now available, the housing outlook looks solid for this year." In addition, as employment rates continue to improve, homebuying is expected to increase in the coming months. According to Yun, existing-home sales will climb to a minimum of 6.5 million in 2021. Though he predicts rising mortgage rates due to budget deficits and climbing inflation, Yun believes sales will remain strong.
First-Time Buyers See Potential
First-time buyers accounted for 33% of all purchases in January, up from 31% a month ago and 32% a year ago. According to the NAR "2020 Profile of Home Buyers and Sellers," first-time buyers made up 31% of the buying public in 2020. Individual investors and second-home buyers—a group who account for most all-cash sales—were responsible for 15% of all home purchases, up from 14% in December but down from 17% in January 2020. Of all sales transactions, 19% were all cash, unchanged from a month ago but down from 21% a year ago. Meanwhile, distressed sales—including foreclosures and short sales—accounted for fewer sales, representing just 1% of all transactions in January. This was unchanged from a month ago but down 2% from January 2020.
Nationwide, January's existing-home sales climbed to a seasonally adjusted annual rate of 6.69 million. This was a 0.6% increase month over month and a 23.7% increase year over year.
Northeast - Existing-home sales annual rate of 870,000; a decrease of 2.2% from December 2020 but an increase of 24.3% from January 2020. The median sales price, $361,400, increased 15.8% from January 2020.
Midwest - Existing-home sales annual rate of 1.57 million; an increase of 1.9% from December 2020 and 22.7% from January 2020. The median sales price, $227,800, increased 14.7% from January 2020.
South - Existing-home sales annual rate of 2.94 million; an increase of 3.2% from December 2020 and 25.1% from January 2020. The median sales price, $263,300, increased 14.6% from January 2020.
West - Existing-home sales annual rate of 1.31 million; a decrease of 4.4% from December 2020 but an increase of 21.3% from January 2020. The median sales price, $461,800, increased 16.1% from January 2020.
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