By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.
The first monthly home sales numbers of 2014 came out late last week, giving us a peek into the year ahead. The prognosis? It’s been a harsh winter in much of the country, impacting America’s appetite for moving.
Perhaps to no one’s surprise, existing-home sales slowed down in January, falling to their lowest level in a year and a half in the National Association of Realtors’ latest report. Total sales, which include townhomes, condos and co-ops, fell 5.1% to an adjusted rate of 4.62 million in January from December, and were 5.1% below the pace seen in January 2013.
It was the slowest month since July 2012.
What’s causing the slowdown and do we need to worry?
For one, it’s winter. While many in the west enjoy mild year-round weather, that’s not the case for much of the rest of the country. People generally don’t like to move at this time of year if they can help it. Although the NAR numbers are seasonally adjusted, we can see the impact on sales this time of year.
While sales have slowed, the median home price for all housing types continues to climb. In January it was $188,900, up 10.7% from the same time a year ago.
Higher prices, tighter credit, limited inventory and higher interest rates are other factors causing a slowdown in home sales.
The total number of available homes for sale increased 2.2% to 1.9 million homes in January. But some metropolitan areas still struggle with enough homes to meet rising demand.
In areas where inventory is seriously short, we’ll likely continue to see higher prices with lower sales. A busy spring home buying season may help to ease some of the pressure as more owners tend to put their houses for sale at this time of year. The next couple of months will be the true test of what we can expect for overall sales this year.
Interest rates have crept up, though they still remain very low in the grand scheme of things. Rates on the average 30-year fixed-rate mortgage averaged 4.43% in January, down from 4.46% in December and up from 3.41% a year ago, according to Freddie Mac.
The increase, along with higher home values is enough to push some buyers out of the market, though we haven’t seen a huge impact yet.
The first month of the year indicates it is going to be a somewhat delicate year for the market. We’re likely to see wildly different experiences in pockets across the country. Rising prices and bidding frenzy will rule those markets with booming economies and limited housing supply. Other markets may see more inventory, waning demand and a much slower pace of sales.