West Sees a Spike in Home Sales

Used home sales in the West accelerated in January, according to the National Association of Realtors (NAR), part of a national trend that saw sales rebound to their highest levels since August, a positive sign for a section of the housing market that has struggled amid high borrowing costs.

The West experienced a sales jump of more than 4 percent last month to 730,000 and increased by nearly 3 percent compared to a year ago. The Northeast saw sales stay the same from December, but were down nearly 6 percent from last year.

The Midwest saw sales increase by more than 2 percent, though it was lower than last year by more than 3 percent. The South recorded a 4 percent increase in sales in January, but decrease of 1.6 percent from a year a

Overall, at the national level used home sales rose by 3.1 percent though on annual basis they were close to 2 percent lower, NAR data showed.

The used homes market has suffered as mortgage rates soared to 8 percent—the highest level in two decades. Sellers who own properties under cheap home loans were “locked in” to those mortgages and have been reluctant to give them up and enter a market with historic levels of rates. That stifled supply, which in turn escalated competition among buyers and helped push up prices.

Over the past few weeks, rates declined to the mid-6 percent range and coincided with the jump in sales of 4 million homes last month.

“Mortgage rates tumbled from late October through mid-January, propelling sales as shoppers capitalized on lower costs,” Danielle Hale, the chief economist at realtor.com, said in a note.

Housing economists are hoping that the rise in sales in January may signal a more dynamic used homes market for the rest of the year.

“While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand,” Lawrence Yun, NAR’s chief economist, said in a statement. “Listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year.”

Inventory jumped in January and was also higher than at the same time a year ago by more than 3 percent, coming to nearly a million homes, NAR data showed.

But prices across the regions continued to be elevated, with the median used home price jumping by more than 5 percent to $379,100

“The median home price reached an all-time high for the month of January,” Yun said. “Multiple offers are common on mid-priced homes, and many homes were still sold within a month. The elevated share of cash deals—32%—indicated a market full of multiple offers and propelled by record-high housing wealth.”

Outlook of used homes market for 2024

Economists suggested that with the Federal Reserve expected to slash borrowing costs in the coming months, the used home sales may see more activity compared to last year.

“As the Fed prepares for their first rate cut in years, investors should expect mortgage rates to fall by the end of this year, providing a catalyst for an improving residential real estate market later this year,” Jeffrey Roach, chief economist for LPL Financial, said in a note shared with Newsweek.

Listings have been trending up, according to real estate agents, as some sellers are taking advantage of rising prices to offload their properties.

“Our forecast is for home sales to trend higher in 2024 to a pace of 4.2 million by [the fourth quarter],” Nancy Vanden Houten, a lead U.S. economist at Oxford Economics, said in a note shared with Newsweek.

Some analysts say the January sales illustrated that the market was maybe getting back to normal.

“January saw some normalization of existing home sales after very weak sales in late 2023. Even so, the January sales rate was depressed compared to the 5.33 million average in 2018-2019, not to mention the surge to 6.13 million units in 2021,” Bill Adams, chief economist for Comerica Bank, said in a note.

Despite increased inventory, unsold homes were only sustainable for a 3-month supply, lower than in December, though a tad higher than at the same time a year ago, as sellers are still staying put in their low mortgages.

But the scarcity of used homes creates an opening for builders.

“The low supply of existing homes will likely create an opportunity for homebuilders eager to meet consumer demand,” Roach said.

Part of a rise in demand for housing is due to changing nature of how Americans live and work, according to Adams, a trend that is likely to shape the housing market going forward.

“Housing is quite expensive in the United States as people spend more time at home and less in offices and stores,” he said. “This fundamental change in how Americans spend their days will likely keep demand strong and house prices relatively expensive.”