Home sales rose to their highest level in six months in January. The new year is off to a good start for both home buyers and sellers.
Sales of pre-owned homes ticked up nearly half a percent from December, a month in which sales grew a surprising 15 percent.
Seasonally-adjusted annualized sales now stand at 5.47 million, matching levels seen during the summer 2015 buying season. It’s only January, but spring and summer home shoppers seem to have already arrived.
Home buyers who are waiting for summer to buy might benefit from less competition — and potentially lower mortgage rates — that are available today.
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Sales Growth Highest Since 2013
Existing-home sales were up 11 percent compared to one year ago. It represents the largest year-over-year gain since July 2013.
The Existing-Home Sales report, published monthly by the National Association of Realtors (NAR), analyzes how many non-new-construction homes were sold in a given month. It then “annualizes” the findings to show one month’s sales as a 12-month figure.
The report also analyzes home prices. In January, the median existing-home price is up to $213,800, also marking an impressive year-over-year gain of 8.2 percent.
January was the 47th month in a row with reported increases in median home prices.
Expect a Competitive Spring Buying Season
The challenge for buyers looking ahead is tight inventory. Just 1.82 million homes are on the market nationwide.
That’s a home supply of about 4 months right now. Anything less than a six-month supply is thought to give sellers the upper hand in negotiating.
Homes that are for sale are going quickly, too, with 32 percent of homes sold in January selling in less than a month.
Overall, homes sold faster in January than they did during any January since the NAR started keeping track five years ago.
Historically, homes sit on the market in January longer than any other month. This year, buyers and sellers should prepare for an even more fast-paced market as the year progresses.
But home buyers do not need to be too worried. Homeowners could recognize an oncoming seller’s market could list their homes in record numbers. That would balance out the demand somewhat, and keep prices from shooting up too quickly.
Rates Still Low, But for How Long?
One area of the real estate market that’s still quite buyer-friendly is interest rates. Low interest rates on mortgages are most likely a contributing factor to the sense of urgency among buyers who are looking to lock in a good deal.
In January, according to Freddie Mac, 30-year fixed-rate conventional home loans decreased to 3.87, maintaining a six-month streak of sub-4 percent rates. Keep in mind, however, that the Fed will meet again in March to decide if it will raise its benchmark interest rates.
On paper, as home prices rise and mortgage rates remain low, the implication is that home buyers will pay more the longer they wait. For prospective sellers, the high demand and favorable pricing might serve to draw them into listing their homes, thus helping inventory recover.
Click here to check today’s mortgage rates.
Next Steps for Home Buyers
January’s strength indicates fast spring home sales. That could make now a great time to work with a lender to get a pre-approval letter. That way, you’ll have it in writing that you’re a serious home shopper who’s ready to move forward.
In fact, it’s one of the first things a real estate agent will ask you for when you begin looking.