January Saw a Significant Increase in Pending Home Sales
Pending home sales increased for the second consecutive month in January, the biggest since the pandemic recovery in June 2020. According to the National Association of Realtors® (NAR), Pending Home Sales Index (PHSI) increased by 8.1% in January to 82.5%, in addition to a December gain of 2.5%. Compared to the 108.7% level from January 2022, the PHSI value from last month was down 24.1%. In 2001, 100 served as the index’s baseline.
Only a 1.0 percent increase in pending sales was what analysts surveyed by Econoday and Trading Economics had predicted.
According to NAR, the 30-year fixed mortgage rate will steadily decline to an average of 6.1% in 2023 and 5.4% in 2024, which predicts that the economy will continue to create jobs during 2023 and 2024.
The annual existing-home sales are anticipated to decline 11.1% this year to a total of 4.47 million units before increasing 17.7% in 2024 to 5.26 million units, despite an improving environment for loan rates and job growth. Sales of new homes are anticipated to be more robust, declining by 3.7% annually in 2023 before increasing by 19.4 percent in 2024.
New Home Sales Having a Solid Start to the Year
Sales of new single-family homes jumped to a seasonally adjusted annual rate of 670,000 in January, according to data released on Friday by HUD and the Census Bureau, which is 7.2% more than the previously reported December pace of 625,000.
Regionally, the outcomes were inconsistent, and the weather was probably to blame. The South saw most of the month’s growth, with sales up 17.1% to 451,000 units in January (seasonally and yearly adjusted) from 385,000 units in December. Sales in the West decreased by 7.3% from December to 127,000 units, seasonally and yearly adjusted. In the Midwest, sales dropped from 72,000 units in December to 67,000 in January. Sales in the Northeast dropped from 31,000 units in December to 25,000 units in January, a 19.4% decrease.
“Builders are not only using incentives to bolster sales, such as rate buydowns, paying points and offering price reductions but also offering upgrades on appliances and other quality features, essentially giving the buyer more home for the same amount of money that they had originally contracted for,” said Odeta Kushi, Deputy Chief Economist with First American Financial Corp., Santa Ana, Calif. Kushi also added that higher builder costs continue to be a roadblock to producing more entry-level houses.
According to HUD/Census data, the average sales price of new homes sold in January increased to $474,400, while the median sales price increased to $427,500. At the end of January, the seasonally adjusted estimate of new homes for sale dropped to 439,000. This translates to a supply of 7.9 months at the current sales pace.
S&P Case-Shiller Reports Home Price Gains Slowed Down Significantly as 2022 Closes
Data released on Tuesday showed that while prices were still higher than they were a year earlier, the rate of increase rapidly slowed. According to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, housing prices in December were 5.8% higher than in December of the prior year. This is less than the 7.6% yearly gain seen in November. The current price level is 4.4% below the June peak. By the end of 2022, increases in home prices were hampered by higher mortgage rates.
The 10-city composite’s annual growth rate, which includes the metro areas of New York and Los Angeles, was 4.4% in December, down from 6.3% the previous month. The 20-city composite, which includes Dallas and Seattle, had an increase of 4.6% from a year earlier, down from 6.8% the month prior.
With a substantial increase in the number of homes going under contract in January, home sales rebounded. However, given the rising interest rates and the low number of available houses for sale in February, it is unlikely for this trend to continue.
Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023, https://rvionline.thinkific.com/courses/take/rvi-weekly-newsletter/texts/41523497-weekly-newsletter-january-6-2023.
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