Sales of previously owned homes rose in nearly every region of the country in January according to an industry report released Thursday. Meanwhile, the supply of homes for sale continued to drop, pushing up property values for the 11th consecutive month of year-over-year gains.
Total existing-home sales—completed purchases that include single-family homes, condos, townhomes, and co-ops—increased 0.4 percent in January to an annualized rate of 4.92 million, according to the National Association of Realtors. That's more than 9 percent ahead of the sales pace recorded in January 2012, and the second highest rate of sales since November 2009, when a federal homebuyer tax credit was set to expire.
Experts credit heightened buyer interest and a tightening supply of homes for sale for the burgeoning seller's market materializing across the country, with the most acute conditions happening the West.
Total housing inventory at the end of January 2013 fell almost 5 percent to 1.74 million—a 4.2-month supply at the current sales pace—the lowest supply of homes since December 1999 when there were 1.71 million homes on the market.
Many would-be sellers continue to hold off from putting their homes on the market because they have underwater mortgages, experts say. While almost 2 million Americans were freed from negative equity in 2012, according to a recent report from real estate website Zillow, nearly 14 million still remain in trouble on their mortgages.
"Negative equity is still very high, and millions of homeowners have a very long way to go to get back above water, even with current robust levels of home value appreciation in most areas," Zillow Chief Economist Stan Humphries said in a release. "As a result, negative equity will remain a major factor in the market for the foreseeable future."
Foreclosures, the glut of which was once a source of great anxiety in the housing market, have consistently made up a smaller portion of sales in recent months, further constraining a once-plentiful source of home supply for the crucial first-time homebuyer set.
But even with inventory the tightest it's been in years, experts aren't expecting any relief anytime soon. "We expect a seasonal rise of inventory this spring, but it may be insufficient to avoid more frequent incidences of multiple bidding and faster-than-normal price growth," NAR Chief Economist Lawrence Yun said in a statement, adding that increased buyer traffic has effectively transformed much of the country into a seller's market.
"Buyer traffic is continuing to pick up, while seller traffic is holding steady," he said. "Buyer traffic is 40 percent above a year ago, so there is plenty of demand but insufficient inventory to improve sales more strongly."
90 Percent of U.S. Cities Post Home Price Gains
A dwindling supply of lower-priced homes and foreclosures continued to fuel the upward trend in home prices, an industry report showed Monday, with property values posting the strongest year-over-year increase in seven years.
Home prices rose in nearly 90 percent of the nation's largest metropolitan areas in the fourth quarter of 2012 according to the National Association of Realtors. The national median existing single-family home price rose 10 percent to $178,900, the strongest year-over-year price increase since the fourth quarter of 2005 when the median price jumped 13.6 percent.
Economists credited an improving job market and rock-bottom low interest rates for the home price increases as heightened demand put more pressure on a seemingly ever-tightening supply of homes.
“Home sales are being fueled by a pent-up demand and job creation, along with still favorable affordability conditions and rents rising at faster rates," NAR Chief Economist Lawrence Yun said in a statement. "Our population has been growing faster than overall housing stock, so supply and demand dynamics are very much at play."
While "favorable affordability conditions" still exist according to NAR, a shrinking supply of lower-priced homes and foreclosures continued to account for some of the upward price pressure. Distressed homes—foreclosures and short sales—generally sell at deep discounts and depress overall home prices. Those types of sales only accounted for 23 percent of fourth quarter sales, down from 30 percent a year ago.
The best-performing metro area was Phoenix, where property values increased 34 percent from a year earlier. Close behind were Detroit and San Francisco, where prices rose 31 percent and 28 percent respectively. On the flipside, Kingston, N.Y., saw the biggest price declines, with the median selling price falling almost 8 percent. Kankakee, Ill., and Erie, Penn., followed, posting 7 percent and 6.1 percent drops respectively
Any questions or feedback on this article, email Rick Roque, Managing Editor of The NicheReport Real Estate Edition, at email@example.com or call him at 408.914.5895.