US existing home sales beat expectations in January

Sales of US existing homes unexpectedly rose in January, while housing inventory was at a record low, according to data released on Friday by the National Association of Realtors.

Sales were up 6.7% from December to a seasonally-adjusted annual rate of 6.5m. Analysts had been expecting sales to fall 1% to 6.1m. Compared with a year earlier, sales were down 2.3%.

The median price of an existing home increased 15.4% on the year to $350,300. Meanwhile, total housing inventory at the end of January was 860,000 units, 2.3% lower compared to December and down 16.5% on the year.

Lawrence Yun, NAR chief economist, said: "Buyers were likely anticipating further rate increases and locking-in at the low rates, and investors added to overall demand with all-cash offers. Consequently, housing prices continue to move solidly higher.

"The inventory of homes on the market remains woefully depleted, and in fact, is currently at an all-time low."

Yun said homes priced at $500,000 and below are disappearing, while supply has risen at the higher price range. He added that such increases will continue to shift the mix of buyers toward high-income consumers.

"There are more listings at the upper end - homes priced above $500,000 - compared to a year ago, which should lead to less hurried decisions by some buyers," Yun said. "Clearly, more supply is needed at the lower-end of the market in order to achieve more equitable distribution of housing wealth."

Pantheon Macroeconomics said: "This unexpected surge in sales appears to have been driven by a sudden increase in the proportion of cash buyers in the market. The NAR reports that cash buyers accounted for 27% of all sales last month, the highest in almost four years, and up from just 19% in January 2021. These data suggest that sales to buyers with mortgages rose only trivially, and have been broadly flat over the next few months.

"We don’t know if the increase in cash buyers will be sustained. But even if the cash proportion increases, we still expect home sales to fall over the next few months in the wake of the spike in mortgage rates. In the meantime, though, this jump in sales pushed inventory down again, to a record low of 1.6 months on our seasonal adjustment, so prices continue to rise very rapidly; single-family prices jumped 15.9% in the year to January. This will moderate later in the year, but for now the increase is relentless."