By Sony Kassam
Existing home sales, supported by an improving labor market, were better than expected in January, rising to the highest annual rate in six months, a trade group said Tuesday.
The National Association of Realtors said existing home sales, including condos, co-ops and single-family homes, inched forward 0.4 percent from December, to a seasonally adjusted annual rate of 5.47 million units, from a downward revised 5.45 million rate in December.
January’s result surpassed the annual rate of 5.32 million that economists surveyed by Bloomberg had been expecting.
Sales are now 11 percent higher than a year ago, which is the largest gain since July 2013.
“The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraint,” said NAR Chief Economist Lawrence Yun in a statement. “Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession.”
Chief Economist Brian Wesbury of First Trust Advisors wrote in an online commentary that existing home sales are no longer affected by the new “Know Before You Owe” rule. Introduced in October, the federal mortgage regulation lengthened the settlement process and influenced home sales to drop in November. But now we’re seeing a “clean” number, Wesbury said.
“In the year ahead, look for higher home prices to lure ‘on-the-fence’ sellers in the market, boosting inventory,” Wesbury wrote.
J.P. Morgan Economist Daniel Silver said in an online note, “It looks like the existing home sales data have held up pretty well recently aside from the short-lived drop in November.”
Separately, the S&P/Case-Shiller U.S. National Home Price Index also revealed continued solid house price growth. Released by the S&P Dow Jones Indices, the leading measure of U.S. home prices recorded a small increase of 0.8 percent in December – completing a 5.4 percent annual increase in 2015, compared to 4.5 percent in 2014.
“These results were modestly below expectations, but the data still show house prices continuing to appreciate at a solid rate through the end of last year,” Silver wrote, adding the West has seen the strongest gains in home prices.
With annual price increases in the double-digits, Portland, Oregon; San Francisco, California; and Denver, Colorado experienced the highest year-over-year gains among the 20 cities. Portland continued to stay on top with an 11.4 percent year-over-year price increase, while Chicago had the second lowest annual price increase with 2.4 percent.
David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices admitted the pace is slowing but also said continued home price increases “should encourage further activity in new construction.”