Home Sales Flat for 4th Straight Month

Average and median prices of existing homes reach all-time highs, as available supply continues to dwindle.

By Manuel Gutierrez, Consulting Economist to NKBA

Sales of existing homes were virtually flat, at an annual pace of 6.69 million units last month, rising 0.6% from December. January marks the fourth consecutive month of nearly flat home sales, which have hovered in a range between 6.59 million and 6.73 million units over this period (Figure 1.)

Nonetheless, the annualized sales rate of 6.7 million units for the latest four months is 25% higher than the rate maintained in the first nine months of last year.

Some of the recent sales reflect a resumption of postponed sales during the pandemic, however. Sales in the 11 months from March 2020 through January, when many states enforced at least partial business closures, were up 7% over the preceding 11-month period.

On an unadjusted basis (actual sales), a total of 367,000 homes were sold last month — 50,000 more than the same month last year.

Sales Rise in Two Regions

Sales improved in two of the four U.S. regions, but they jointly account for more than two-thirds of homes sold. The South, which contributes nearly half of U.S. sales, was up 3.2% to an annual rate of 2.94 million units. The Midwest, with a quarter of the nation’s sales, was up 1.9% to a pace of 1.57 million units (Figure 2.)

The other two regions posted sales declines. The West registered the largest decline, with home sales falling 4.4% in January, to a rate of 1.3 million, while sales in the Northeast were off 2.2%, for a rate of 870,000 units.

Figure 2 shows the sizable gains in January 2021 compared with same month sales in each of the prior two years. For instance, compared to January 2020, sales in each of the four regions were up by better than 20%, ranging from a high of 25% in the South to a low of 21% for the West.

Strong demand for housing combined with a shrinking inventory of homes for sale have driven house prices higher yet. The average (mean) price of an existing home was $338,000, or 11.5% higher than a year ago. This is the highest price increase this century.

The median sales price of an existing home rose by an even stronger 14% in January, reaching $304,000 for the month.

The left panel of Figure 3 displays the trend in January house prices since the turn of the century. Both the median and mean prices are currently at all-time highs, easily exceeding the records that had been established in 2006, at a time when the ready availability of sub-prime loans boosted demand for housing. Today’s median price is nearly 40% higher than what it was back then.

As mentioned earlier, besides strong housing demand, home prices have been boosted by a low supply of home inventory.

The number of homes for sale fell even further in January, to just 1.04 million, a continuation of the pattern started in May 2020, when the demand for homes exploded (Figure 4.)