Existing Home Sales beginning to gain momentum

Sales of existing homes rose a modest 0.4 percent in January from December to a seasonally adjusted 4.92 million, according to a report released Thursday by the National Association of Realtors.

January’s level is more than 9 percent above the 4.51 million units sold the same period last year.

The report shows signs of life for the housing market, which got off to a discouraging start with last month’s 8.5 percent drop in new home construction.

Foreclosures and short sales combined for 23 percent of existing home sales last month, down substantially from 35 percent this time last year.

Last month, the U.S. median existing-home price rose 12 percent to $173,600 from the year-ago period, the largest surge since November 2005. The swell was assisted by several factors, most notably a drop in distressed homes on the market, emptying inventories and progressing buyer demand.

Total housing inventory fell 5 percent in January to 1.74 million units. At its current rate, inventory amounts to a 4.2-month supply of homes, 2 months fewer than a year ago.

Savings realized in purchases of distressed homes remains noticeable. Foreclosures were reduced 20 percent in January and short sales sold 12 percent below market value.

The reduction in foreclosures and housing inventory could point to a shift in momentum for the housing market.

“Buyer traffic is continuing to pick up, while seller traffic is holding steady,” said Lawrence Yun, chief economist at the National Association of Realtors.

“In fact, buyer traffic is 40 percent above a year ago, so there is plenty of demand but insufficient inventory to improve sales more strongly.”

There has been a regional rise in home sales prices since January 2012. While the West has not experienced a rise in total sales, the 26.6 percent sales price increase is welcomed news for a region that has been flooded by foreclosures since 2009.

The Midwest saw a modest rise in existing home sales in January, specifically Illinois. The state has experienced a recent boon in existing home sales, a more than 31 percent surge from this period a year ago.

The median price for existing homes in the state also increased during the past year, ending January at $125,000, or up 1.2 percent from January 2012’s total of $123,500.

But analysts contend that the housing recovery on the national, regional and local levels could be negatively impacted by how Capitol Hill responds to our current national debt.

“The higher probability that sequestration will be realized means U.S. growth in 2013 likely will be about a quarter point slower than previously estimated,” Michael Feroli, chief U.S. economist at JPMorgan Chase in New York, said in a Feb. 14 research note.

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