U.S. home sales increased to a 10-year high in January as buyers ignore higher prices and mortgage rates, which is a indication of rising confidence in the economy. The National Association of Realtors stated on Wednesday that existing home sales leaped 3.3 percent to a seasonally altered annual rate of 5.69 million units last month; the highest level since February 2007.
December's sales pace was adjusted up to 5.51 million units from the prior reported 5.49 million units. Economists had predicted sales to increase 1.1 percent to a pace of 5.54 million units in January. The NAR also changed sales data from 2014. The changes were negligible and had no effect on the classification of the housing market. Prices for U.S. government debt fell after the data, while the dollar .DXY was barely changed against a basket of currencies. The PHLX housing index .HGX increased 0.6 percent, outperforming the wider U.S. stock market.
Home sales were up 3.8 percent from January 2016. Demand for housing is being supported by a strengthening labor market, which is refining employment opportunities for young adults and also enhancing household structure.
A consistent lack of properties available for sale, which is elating house prices, remains an obstacle to a vigorous housing market. While the 30-year fixed mortgage rate happens to be stabilizing after quickly rising in recent months, it still stays above 4 percent. In contrast, annual wage growth is running below 3 percent. Economists predict home sales to deliberate this year.
The amount of homes on the market increased 2.4 percent to 1.69 million units in January. The housing inventory was down 7.1 percent from a year ago and has now fell for 20 straight months on a year-on-year basis.
Economists state homebuilders are having trouble with the inventory gap because of complications of securing funding as well as scarcity of land and labor. The NAR estimates housing starts and completions should be in a range of 1.5 million to 1.6 million units to alleviate the chronic shortage. Housing starts are running above a rate of 1.2 million units and completions around a pace of 1 million units. As less are homes available for sale, house prices maintained their ascension last month. The median house price rose 7.1 percent from a year ago to $ 228,900 in January; the biggest increase since January 2016.
Last month, existing home sales rose in the Northeast, the West and South. They decreased 1.5 percent in the Midwest. At January's sales pace, it would take 3.6 months to clear the stock of houses on the market. That was unchanged from December.
A six-month supply is perceived as a good balance between supply and demand. The tight supply meant that house prices recorded their 59th consecutive month of year-on-year gains in January. The higher prices are increasing equity for homeowners and might persuade some to put their homes on the market, but could benefit to sideline first-time buyers from the market. First-time buyers consisted of 33 percent of transactions last month, well below the 40 percent share that economists and realtors say is needed for a strong housing market. That was up from 32 percent in December and a year ago.