Existing home sales fell to the lowest level in a year-and-a-half, but ongoing inventory shortages continue to lift prices in much of the US. Total existing home sales dropped 5.1% to a seasonally adjusted annual rate of 4.62 million from 4.87 million the month previous and are also 5.1% below the 4.87 million-unit pace in January 2013. Last month’s level of activity was the slowest since July 2012, when it stood at 4.59 million.
Disruptive and prolonged winter weather patterns across the country are impacting a wide range of economic activity, and housing is no exception. Some housing activity will be delayed until spring. At the same time, we can’t ignore the ongoing headwinds of tight credit, limited inventory, higher prices and higher mortgage interest rates. These issues will hinder home sales activity until the positive factors of job growth and new supply from higher housing starts begin to make an impact.
In addition to disruptive weather, higher flood insurance rates are impacting the market in areas designated as flood zones, which account for roughly 8-9% of sales. Thirty percent of transactions in flood zones were cancelled or delayed as a result of sharply higher flood insurance rates.
Since going into effect on October 1, 2013, about 40,000 home sales were either delayed or canceled because of increases and confusion over significantly higher flood insurance rates. The volume could accelerate as the market picks up this spring. Congress is considering legislation to halt new flood insurance rates so the Federal Emergency Management Agency can complete an affordability study and determine the full impact of the law.
Single-family home sales fell 5.8 percent to a seasonally adjusted annual rate of 4.05 million in January from 4.30 million in December, and are 6.0 percent below the 4.31 million-unit pace in January 2013. The median existing single-family home price was $188,900 in January, up 10.4 percent from a year ago.
Regionally, existing home sales in the Northeast declined 3.1% to an annual rate of 620,000, and are also 3.1% below January 2013. The median price in the Northeast was $241,100, up 6.6% from a year ago. Existing home sales in the Midwest dropped 7.1% to a pace of 1.04 million, and are 8.8% below a year ago. The median price in the Midwest was $140,300, which is 7.6% higher than January 2013.
In the South, existing home sales declined 3.5% to an annual level of 1.95 million but are 1.6% higher than January 2013. The median price in the South was $161,500, up 9.4% from a year ago. Existing home sales in the West dropped 7.3% to a pace of 1.01 million in January, and are 13.7% below a year ago. Sales in the West are attenuated by tight inventory in many areas, pushing the median price to $273,500, up 14.6% from January 2013.