Home Sales 'Are Bottoming Out' as Slide Extends 12 Months

Existing home sales fell for the 12th month in a row in January, while prices have softened, the National Association of Realtors reported Tuesday.

NAR found single-family homes, townhomes, condominiums and co-ops sold at a seasonally adjusted annual rate (SAAR) of 4.0 million in January, down 37% from a year earlier and down 0.7% from December.

However, the December-to-January declines in existing home sales were confined to the East and Midwest, while sales rose for the month in the West and South. Also, the Mortgage Bankers Association reported Feb. 17 that new home sales, while down from a year ago, rose from December.

On Jan. 27, the Realtors reported that pending home sales rose in December for the first time since May 2022 — following six consecutive months of declines in the measure. At the time, NAR Chief Economist Lawrence Yun said it indicated home sales had likely hit their low and were on their way up.

“Home sales are bottoming out,” Yun said Tuesday. “Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines.”

NAFCU Chief Economist Curt Long said homebuilders and real estate agents observed higher traffic during January as a drop in mortgage rates brought buyers off the sidelines.

“But sales nevertheless sunk to a post-financial crisis low due to constrained supply,” Long said. “NAFCU expects stable sales volume in 2023, with any rate volatility simply impacting price growth.”

NAR found half of existing-home prices were $359,000 or more in January, up 1.3% from January 2022. The median existing single-family home price was $363,100 in January, up 0.7% from a year earlier.

The inventory of unsold existing homes grew from the prior month to 980,000 at the end of January, or the equivalent of 2.9 months’ supply at the current monthly sales pace, unchanged from December but up from 1.6 months in January 2022.

“Inventory remains low, but buyers are beginning to have better negotiating power,” Yun said. “Homes sitting on the market for more than 60 days can be purchased for around 10% less than the original list price.”

First-time buyers were responsible for 31% of sales in January, identical to December but up from 27% in January 2022. NAR’s 2022 Profile of Home Buyers and Sellers released last November found that the annual share of first-time buyers was 26%, the lowest since NAR began tracking the data.

Individual investors or second-home buyers, who make up many cash sales, purchased 16% of homes in January, unchanged from December but down from 22% in January 2022.

According to Freddie Mac, the 30-year fixed-rate mortgage was 6.32% as of Feb. 16. That’s up from 6.12% from the previous week and 3.92% a year ago.

The Mortgage Bankers Association reported Feb. 17 that single-family home sales were running at a seasonally adjusted annual rate of 725,000 homes in January 2023, down 12% from a year ago but up 13% from the December SAAR of 641,000 homes. The average loan size of new homes increased from $399,555 in December to $401,631 in January.

Joel Kan, the MBA’s deputy chief economist, said home builders have reported improved sentiment in the last two months, but Census data on new residential construction for January showed that single-family housing starts and permitting activity have not picked up yet.

“Additionally, home buyers remain sensitive to mortgage rates, which have trended higher in recent weeks and could delay a potential turning point in the housing market,” Kan said.

The average loan size of new homes increased from $399,555 in December to $401,631 in January.

The MBA said it expects first-quarter mortgage originations to be $333 billion, down 52% from a year earlier, according to its Jan. 19 forecast.

The MBA estimated that the seasonally adjusted delinquency rate from residential mortgages was 3.96% on Dec. 31, down 69 basis points from a year earlier but up 51 bps from Sept. 30. It said the delinquency rate remained low, but rose in part because of a weaker economy and inflation.

Auction.com, a distressed real estate marketplace based in Irvine, Calif., forecast Monday that foreclosure volume would rise 24% from 84,000 in 2022 to 104,000 in 2023 — still about half of the pre-pandemic level of 206,000 in 2019.

Daren Blomquist, vice president of market economics at Auction.com, said that even after the 24% rise this year, the volume of foreclosure auctions would still be about half of their 2019 levels. “As pandemic-era foreclosure protections gradually phased out in 2022, we saw a slowly rising tide of completed foreclosure auctions, not a massive tsunami that some might have feared,” he said.